Jump to ContentJump to Main Navigation
Financial InnovationToo Much or Too Little?$
Users without a subscription are not able to see the full content.

Michael Haliassos

Print publication date: 2013

Print ISBN-13: 9780262018296

Published to MIT Press Scholarship Online: January 2015

DOI: 10.7551/mitpress/9780262018296.001.0001

Show Summary Details
Page of

PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 29 June 2022

Market Efficiency, Rational Expectations, and Financial Innovation

Market Efficiency, Rational Expectations, and Financial Innovation

(p.231) 11 Market Efficiency, Rational Expectations, and Financial Innovation
Financial Innovation

Michael Haliassos

The MIT Press

This chapter draws from the author's past research and related literature to highlight the important linkages between the real economy and financial markets. Factors such as GDP growth, default risk and investment growth rates are presented as examples of significant drivers of returns in risky assets. Such factors have also been successful in explaining various long-standing asset pricing anomalies, suggesting that markets appear rather efficient when financial assets are priced using economic fundamental factors. This approach emphasizes the search for a better understanding of the underlying factor structure of asset returns as it relates to the real economy, and has the potential to lead to a more effective risk management framework. Financial innovation is viewed as a means to make markets more complete so that risk-sharing can be improved. It is therefore considered a necessary and important ingredient of the evolution of our financial system.

Keywords:   Real economy, Risk premia, Anomalies, Behavioral finance, Market efficiency, Innovation

MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.