Liquidity premia in dynamic bargaining markets
AbstractThis paper develops a search-theoretic model of the cross-sectional distribution of asset returns, abstracting from risk premia and focusing exclusively on liquidity. In contrast with much of the transaction-cost literature, it is not assumed that different assets carry different exogenously specified trading costs. Instead, different expected returns, due to liquidity, are explained by the cross-sectional variation in tradeable shares. The qualitative predictions of the model are consistent with much of the empirical evidence.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 140 (2008)
Issue (Month): 1 (May)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Pierre-Olivier Weill, 2004. "Liquidity Premia in Dynamic Bargaining Markets," Econometric Society 2004 North American Winter Meetings 648, Econometric Society.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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