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Finance in a Time of Disruptive Growth

Author

Listed:
  • Stavros Panageas

    (Anderson School of Management)

  • Nicolae Garleanu

    (University of California-Berkeley)

Abstract

Increased arrival of new technologies and displacement of old technologies leads to increased heterogeneity of investment income across investors. Investors who find themselves with high exposures to successful new firms win a disproportionate share of profits, while those who hold lower exposures may end up with a lower fraction of aggregate investment income. Alternative asset classes as diverse as commercial real estate, commodities, and private equity offer hedging and diversification benefits in a world of increased displacement, and therefore experience increased inflows. The same applies to zero-net supply risk free investments, leading to a drop in the risk free rate. Surprisingly, and despite providing hedging benefits, there is a positive gap between the expected returns of privately and publicly traded assets, which narrows as the endogenously determined size of the financial industry increases.

Suggested Citation

  • Stavros Panageas & Nicolae Garleanu, 2017. "Finance in a Time of Disruptive Growth," 2017 Meeting Papers 1570, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1570
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    Citations

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    Cited by:

    1. Perotti, Enrico & Döttling, Robin, 2017. "Secular Trends and Technological Progress," CEPR Discussion Papers 12519, C.E.P.R. Discussion Papers.
    2. Knesl, Jiří, 2023. "Automation and the displacement of labor by capital: Asset pricing theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 147(2), pages 271-296.
    3. Matthieu Gomez & Émilien Gouin‐Bonenfant, 2024. "Wealth Inequality in a Low Rate Environment," Econometrica, Econometric Society, vol. 92(1), pages 201-246, January.
    4. Benjamin Moll, 2020. "Comment on "Sources of US Wealth Inequality: Past, Present, and Future"," NBER Chapters, in: NBER Macroeconomics Annual 2020, volume 35, pages 468-479, National Bureau of Economic Research, Inc.
    5. Perotti, Enrico & Döttling, Robin, 2019. "Redistributive Growth," CEPR Discussion Papers 13984, C.E.P.R. Discussion Papers.
    6. Moll, Ben, 2020. "Comment on Hubmer, Krusell & Smith “Sources of U.S. wealth inequality: past, present, and future”," LSE Research Online Documents on Economics 107424, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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