Differential Awareness, Financial Innovation and Financial Crises
17 Pages Posted: 21 Aug 2014
Date Written: August 20, 2014
In this paper, it is argued that differential awareness plays a crucial role in the operation of financial markets. The interaction between awareness and arbitrage is crucial in explaining both beneficial and harmful financial innovations. Financial crises may be explained as the result of sudden changes in awareness, which may be exogenous or endogenous.
Keywords: unawareness, financial innovation
JEL Classification: G02
Suggested Citation: Suggested Citation