IDEAS home Printed from https://ideas.repec.org/a/eee/jfinin/v8y1999i1-2p68-89.html
   My bibliography  Save this article

Diversity of Opinion and Financing of New Technologies

Author

Listed:
  • Allen, Franklin
  • Gale, Douglas

Abstract

The objective is to compare the effectiveness of financial markets and financial intermediaries in financing new industries and technologies in the presence of diversity of opinion. In markets, investors become informed about the details of the new industry or technology and make their own investment decisions. In intermediaries, the investment decision is delegated to a manager. She is the only one who needs to become informed, which saves on information costs, but investors may anticipate disagreement with her and be unwilling to provide funds. Financial markets tend to be superior when there is significant diversity of opinion and information is inexpensive.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Allen, Franklin & Gale, Douglas, 1999. "Diversity of Opinion and Financing of New Technologies," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 68-89, January.
  • Handle: RePEc:eee:jfinin:v:8:y:1999:i:1-2:p:68-89
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-9573(99)90261-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    2. Kandel, Eugene & Pearson, Neil D, 1995. "Differential Interpretation of Public Signals and Trade in Speculative Markets," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 831-872, August.
    3. Boot, Arnoud W A & Thakor, Anjan V, 1997. "Financial System Architecture," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 693-733.
    4. McKelvey, Richard D & Page, Talbot, 1986. "Common Knowledge, Consensus, and Aggregate Information," Econometrica, Econometric Society, vol. 54(1), pages 109-127, January.
    5. Pagano, Marco, 1993. "The flotation of companies on the stock market : A coordination failure model," European Economic Review, Elsevier, vol. 37(5), pages 1101-1125, June.
    6. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
    7. Thakor, Anjan V., 1996. "The design of financial systems: An overview," Journal of Banking & Finance, Elsevier, vol. 20(5), pages 917-948, June.
    8. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(2), pages 227-253, October.
    9. Geanakoplos, John D. & Polemarchakis, Heraklis M., 1982. "We can't disagree forever," Journal of Economic Theory, Elsevier, vol. 28(1), pages 192-200, October.
    10. John Lintner, 1965. "Security Prices, Risk, And Maximal Gains From Diversification," Journal of Finance, American Finance Association, vol. 20(4), pages 587-615, December.
    11. Avanidhar Subrahmanyam & Sheridan Titman, 1999. "The Going‐Public Decision and the Development of Financial Markets," Journal of Finance, American Finance Association, vol. 54(3), pages 1045-1082, June.
    12. Boot, Arnoud W A & Thakor, Anjan V, 1997. "Banking Scope and Financial Innovation," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1099-1131.
    13. Harris, Milton & Raviv, Artur, 1993. "Differences of Opinion Make a Horse Race," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 473-506.
    14. Mayer,Colin & Vives,Xavier (ed.), 1993. "Capital Markets and Financial Intermediation," Cambridge Books, Cambridge University Press, number 9780521443975, October.
    15. Robert J Aumann, 1999. "Agreeing to Disagree," Levine's Working Paper Archive 512, David K. Levine.
    16. Yosha Oved, 1995. "Information Disclosure Costs and the Choice of Financing Source," Journal of Financial Intermediation, Elsevier, vol. 4(1), pages 3-20, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fohlin, Caroline, 1999. "Universal Banking in Pre-World War I Germany: Model or Myth?," Explorations in Economic History, Elsevier, vol. 36(4), pages 305-343, October.
    2. Helwege, Jean & Packer, Frank, 2009. "Private matters," Journal of Financial Intermediation, Elsevier, vol. 18(3), pages 362-383, July.
    3. Bougheas, Spiros, 2007. "Imperfect capital markets, income distribution and the choice of external finance: A financial equilibrium approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(4), pages 507-520, September.
    4. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
    5. Coval, Joshua D. & Thakor, Anjan V., 2005. "Financial intermediation as a beliefs-bridge between optimists and pessimists," Journal of Financial Economics, Elsevier, vol. 75(3), pages 535-569, March.
    6. Foucault, Thierry & Gehrig, Thomas, 2008. "Stock price informativeness, cross-listings, and investment decisions," Journal of Financial Economics, Elsevier, vol. 88(1), pages 146-168, April.
    7. Gibson, Rajna & Habib, Michel A. & Ziegler, Alexandre, 2014. "Reinsurance or securitization: The case of natural catastrophe risk," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 79-100.
    8. Das, Sanjiv R. & Nanda, Ashish, 1999. "A theory of banking structure," Journal of Banking & Finance, Elsevier, vol. 23(6), pages 863-895, June.
    9. Cheng, Ing-Haw & Hsiaw, Alice, 2022. "Distrust in experts and the origins of disagreement," Journal of Economic Theory, Elsevier, vol. 200(C).
    10. Benveniste, Lawrence M. & Busaba, Walid Y. & Wilhelm, William Jr., 2002. "Information Externalities and the Role of Underwriters in Primary Equity Markets," Journal of Financial Intermediation, Elsevier, vol. 11(1), pages 61-86, January.
    11. Liu, Qi & Sun, Bo, 2018. "Managerial manipulation, corporate governance, and limited market participation," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 98-117.
    12. Luigi Guiso & Raoul Minetti, 2010. "The Structure of Multiple Credit Relationships: Evidence from U.S. Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(6), pages 1037-1071, September.
    13. Markus Glaser & Martin Weber, 2007. "Overconfidence and trading volume," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 1-36, June.
    14. Vinogradov, Dmitri & Makhlouf, Yousef, 2021. "Two faces of financial systems: Provision of services versus shock-smoothing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    15. Sandroni, Alvaro, 1998. "Learning, Rare Events, and Recurrent Market Crashes in Frictionless Economies without Intrinsic Uncertainty," Journal of Economic Theory, Elsevier, vol. 82(1), pages 1-18, September.
    16. Bernard Dumas & Alexander Kurshev & Raman Uppal, 2009. "Equilibrium Portfolio Strategies in the Presence of Sentiment Risk and Excess Volatility," Journal of Finance, American Finance Association, vol. 64(2), pages 579-629, April.
    17. Xie, Yinxi & Xie, Yang, 2017. "Machiavellian experimentation," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 685-711.
    18. Hans Gersbach & Harald Uhlig, 2007. "On the Coexistence of Banks and Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 225-243, June.
    19. Jobst, Andreas A., 2002. "Collateralised loan obligations (CLOs): A primer," CFS Working Paper Series 2002/13, Center for Financial Studies (CFS).
    20. Hendrik Hakenes & Svetlana Katolnik, 2018. "Optimal Team Size and Overconfidence," Group Decision and Negotiation, Springer, vol. 27(4), pages 665-687, August.

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfinin:v:8:y:1999:i:1-2:p:68-89. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622875 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.