Stock exchange competition in a simple model of capital market equilibrium
AbstractThis paper uses a simple model of mean-variance capital markets equilibrium with proportional transactions costs to analyze the competition of stock markets for investors. We assume that equity trading is costly and endogenize transactions costs as variables strategically influenced by stock exchanges. Among other things, the model predicts that increasing financial market correlation leads to a decrease of transaction costs, an increase in cross-border trading activity, and to a decrease in the home bias of international equity flows. These predictions are consistent with the recent evolution of international stock markets.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Markets.
Volume (Year): 11 (2008)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/finmar
Other versions of this item:
- Sofia B. RAMOS & Ernst-Ludwig VON THADDEN, 2003. "Stock Exchange Competition in a Simple Model of Capital Market Equilibrium," FAME Research Paper Series rp109, International Center for Financial Asset Management and Engineering.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
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