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Albagli, Elias, Hellwig, Christian
and Tsyvinski, Aleh
(2018)
Imperfect Financial Markets and Investment Inefficiencies.
TSE Working Paper, n. 18-891, Toulouse
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Abstract
We analyze the consequences of noisy information aggregation for investment. Market imperfections create endogenous rents that cause overinvestment in up-side risks and underinvestment in downside risks. In partial equilibrium, these inefficiencies are particularly severe if upside risks are coupled with easy scalabil-ity of investment. In general equilibrium, the shareholders’ collective attempts to boost value of individual firms leads to a novel externality operating through price that amplifies investment distortions with downside risks but offsets dis-tortions with upside risks.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | February 2018 |
| Place of Publication: | Toulouse |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 24 Apr 2018 09:40 |
| Last Modified: | 17 Jul 2023 11:54 |
| OAI Identifier: | oai:tse-fr.eu:32475 |
| URI: | https://publications.ut-capitole.fr/id/eprint/25854 |
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