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Stock exchange competition in a simple model of capital market equilibrium

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  • Ramos, Sofia B.
  • von Thadden, Ernst-Ludwig

Abstract

This 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 Info

Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 11 (2008)
Issue (Month): 3 (August)
Pages: 284-307

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Handle: RePEc:eee:finmar:v:11:y:2008:i:3:p:284-307

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Web page: http://www.elsevier.com/locate/finmar

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Cited by:
  1. Otchere, Isaac, 2006. "Stock exchange self-listing and value effects," Journal of Corporate Finance, Elsevier, vol. 12(5), pages 926-953, December.
  2. Jérémy Ducros & Angelo Riva, 2014. "The Lyon Stock Exchange: A Struggle for Survival (1866-1914)," PSE Working Papers halshs-00960528, HAL.
  3. Giofré, Maela, 2013. "International diversification: Households versus institutional investors," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 145-176.
  4. Faten Ben Slimane, 2012. "Stock exchange consolidation and return volatility," Managerial Finance, Emerald Group Publishing, vol. 38(6), pages 606-627, May.
  5. Sofia B. Ramos, 2003. "Competition Between Stock Exchanges: A Survey," FAME Research Paper Series rp77, International Center for Financial Asset Management and Engineering.

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