"While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation, which represents a powerful economic force in the opposite direction. This paper investigates the effect of...

Popular press and some practitioners have warned against threats that buying risky assets pose on agents saving for retirement, children education and other uses. This paper shows that in a standard two-period general equilibrium model where some savers have no risk-sharing motives, there exists...