Desmarais Global Finance Research Centre (DGFRC) Seminar: Guillermo Ordo帽ez
Guillermo Ordo帽ez
University of Pennsylvania
Information Technologies and Safe Assets
Date: Friday, May 3, 2024
Time: 10:30-11:45 am
Location: Bronfman Bldg. (1001 Sherbrooke St. West), Room 360
Please dgfc.mgmt [at] mcgill.ca (subject: Desmarais%20Global%20Finance%20Research%20Centre%20Seminars) (contact us) for more details.
Abstract:
We show that, although safe assets - in the form of diversified pools of risky assets - are by construction insensitive to information, their quantity is not. Information technologies discourage the sale of the assets underlying the pool by making agents more able to face their own risk and, ex-ante, more exposed to sale price uncertainty. In general equilibrium, sellers do not internalize their social benefit on the supply of safe assets, resulting in an inefficient shortage. Information technologies exacerbate the shortage, but improve welfare unless agents heavily rely on risk-selling and data leak to markets.
