Security Baskets and Index-Linked Securities

Gary B. Gorton, George G. Pennacchi

Research output: Contribution to journalArticlepeer-review

Abstract

Security baskets and index-linked securities whose values are aggregates of the cash flows or values of other assets. Creation of these "composite" securities improves the welfare of uninformed investors by reducing their trading losses. The introduction of composite securities can also affect real investment decisions. When investors are exposed to nontradeable, heterogeneous risks, different trading equilibria are possible. Markets for multiple composite securities may exist or, when the degree of heterogeneity is high, markets for a single composite security and its component securities may coexist. No results depend on the existence of exogenous "noise" traders.
Original languageEnglish (US)
Pages (from-to)1-27
Number of pages27
JournalJournal of Business
Volume66
Issue number1
DOIs
StatePublished - Jan 1 1993

Fingerprint Dive into the research topics of 'Security Baskets and Index-Linked Securities'. Together they form a unique fingerprint.

Cite this