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How does investors' heterogeneous trust affect the complexity of financial products? A look into the development of online finance

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  • Zongrun Wang
  • Mei Yang

Abstract

We introduce “trusting effects” to market complexity strategy and, through modeling, measure the decision‐making behavior of financial institutions' complexity choices as online and offline finance develops into different stages. We find that the complexity of financial products is not only determined by the intrinsic value and structure of products but also largely influenced by the behavior of investors. In addition, the characteristics of financial institutions, as well as different investor structures, also affect the complexity of the products and the equilibrium. Therefore, financial institutions attempt to exploit investors' biases and cognitive limitations through complexity strategies and ultimately obtain excess returns.

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  • Zongrun Wang & Mei Yang, 2019. "How does investors' heterogeneous trust affect the complexity of financial products? A look into the development of online finance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(4), pages 425-438, June.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:4:p:425-438
    DOI: 10.1002/mde.3012
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    Cited by:

    1. Zongrun Wang & Mei Yang, 2020. "Effective allocation of financial services intensity and its impact on channel competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1473-1492, December.
    2. Shi Bo, 2022. "Application of K-means Clustering Algorithm in Evaluation and Statistical Analysis of Internet Financial Transaction Data," Papers 2202.03146, arXiv.org, revised Nov 2022.

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