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Search in Asset Markets: Market Structure, Liquidity, and Welfare

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  • Ricardo Lagos
  • Guillaume Rocheteau

Abstract

This paper investigates how market structure affects efficiency and several dimensions of liquidity in an asset market. To this end, we generalize the search-theoretic model of financial intermediation of Darrell Duffie et al. (2005) to allow for entry of dealers and unrestricted asset holdings.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.2.198
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 2 (May)
Pages: 198-202

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:2:p:198-202

Note: DOI: 10.1257/aer.97.2.198
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References

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  1. Darrell Duffie & Nicolae Garleanu & Lasse Heje Pedersen, 2004. "Over-the-Counter Markets," NBER Working Papers 10816, National Bureau of Economic Research, Inc.
  2. James P. Weston, 2000. "Competition on the Nasdaq and the Impact of Recent Market Reforms," Journal of Finance, American Finance Association, vol. 55(6), pages 2565-2598, December.
  3. Ricardo Lagos & Guillaume Rocheteau, 2006. "Search in asset markets," Staff Report 375, Federal Reserve Bank of Minneapolis.
  4. Michael J. Barclay & William G. Christie & Jeffrey H. Harris & Eugene Kandel & Paul H. Schultz, 1999. "Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks," Journal of Finance, American Finance Association, vol. 54(1), pages 1-34, 02.
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Citations

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Cited by:
  1. Pierre-Olivier Weill & Guillaume Rocheteau & Ricardo Lagos, 2007. "Crashes and Recoveries in Illiquid Markets," 2007 Meeting Papers 981, Society for Economic Dynamics.
  2. Gara M. Afonso, 2008. "Liquidity and congestion," Staff Reports 349, Federal Reserve Bank of New York.
  3. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
  4. Ricardo Lagos, 2008. "The Research Agenda: Ricardo Lagos on Liquidity and the Search Theory of Money," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 10(1), November.
  5. Ricardo Lagos & Gara Afonson, 2011. "Trade Dynamics in the Market for Federal Funds," 2011 Meeting Papers 314, Society for Economic Dynamics.
  6. Lagos, Ricardo & Rocheteau, Guillaume & Weill, Pierre-Olivier, 2011. "Crises and liquidity in over-the-counter markets," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2169-2205.
  7. Shoko Morimoto, 2009. "Asset markets can achieve efficiency in the directed search framework," Discussion Papers in Economics and Business 09-33, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  8. Ricardo Lagos, 2006. "Asset prices and liquidity in an exchange economy," Staff Report 373, Federal Reserve Bank of Minneapolis.
  9. Georges, Christophre, 2008. "Staggered updating in an artificial financial market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2809-2825, September.
  10. Guillaume Rocheteau & Pierre-Olivier Weill, 2011. "Liquidity in frictional asset markets," Working Paper 1105, Federal Reserve Bank of Cleveland.

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