This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Optimal Financial-Market Integration and Security Design

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Viral V. Acharya (London Business School and Center for Economic Policy Research (CEPR))
Alberto Bisin (New York University)

Additional information is available for the following registered author(s):

Abstract

We study 2-period pure-exchange Capital Asset Pricing Model (CAPM) economies with incomplete financial markets and restricted participation. We characterize the optimal financial-market structure and efficient innovations consisting of both the introduction of new assets and the integration of segmented markets. Welfare gains from innovations are maximal when the endowments of affected agents are negatively correlated. Uncoordinated innovations lead to efficient market structures if all assets have identical participation structure or the markets being integrated trade identical assets. However, coordination failure in the introduction of new assets may result when assets have participation structures that overlap only partially.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB780613
File Format: application/pdf
File Function: main text
Download Restriction: no

Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 78 (2005)
Issue (Month): 6 (November)
Pages: 2397-2434
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:6:p:2397-2434

Contact details of provider:
Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Web page: http://www.journals.uchicago.edu/JB/home.html

Order Information:
Web: http://www.journals.uchicago.edu/JB/home.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pesendorfer Wolfgang, 1995. "Financial Innovation in a General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 65(1), pages 79-116, February. [Downloadable!] (restricted)
    Other versions:
  2. Stefano G. Athanasoulis & Robert J. Shiller, 2001. "World Income Components: Measuring and Exploiting Risk-Sharing Opportunities," American Economic Review, American Economic Association, vol. 91(4), pages 1031-1054, September. [Downloadable!] (restricted)
    Other versions:
  3. James McAndrews & Chris Stefanadis, 2002. "The consolidation of European stock exchanges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Jun. [Downloadable!]
  4. Madan, Dilip & Soubra, Badih, 1991. "Design and Marketing of Financial Products," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 4(2), pages 361-84. [Downloadable!] (restricted)
  5. Steven J. Davis & Jeremy Nalewaik & Paul Willen, 2000. "On the Gains to International Trade in Risky Financial Assets," NBER Working Papers 7796, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Athanasoulis, Stefano G & Shiller, Robert J, 2000. "The Significance of the Market Portfolio," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 13(2), pages 301-29.
    Other versions:
  7. Rahi Rohit, 1995. "Optimal Incomplete Markets with Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 65(1), pages 171-197, February. [Downloadable!] (restricted)
  8. Basak, Suleyman & Cuoco, Domenico, 1998. "An Equilibrium Model with Restricted Stock Market Participation," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 11(2), pages 309-41.
  9. Nachman, David C & Noe, Thomas H, 1994. "Optimal Design of Securities under Asymmetric Information," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 1-44. [Downloadable!] (restricted)
  10. Allen, Franklin & Gale, Douglas, 1994. "Limited Market Participation and Volatility of Asset Prices," American Economic Review, American Economic Association, vol. 84(4), pages 933-55, September. [Downloadable!] (restricted)
    Other versions:
  11. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. N. Gregory Mankiw & Stephen P. Zeldes, 1991. "The Consumption of Stockholders and Non-Stockholders," NBER Working Papers 3402, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Diamond, Douglas W, 1997. "Liquidity, Banks, and Markets," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 928-56, October.
    Other versions:
  14. Glaeser, Edward L. & Kallal, Hedi D., 1997. "Thin Markets, Asymmetric Information, and Mortgage-Backed Securities," Journal of Financial Intermediation, Elsevier, vol. 6(1), pages 64-86, January. [Downloadable!] (restricted)
  15. Wincoop, Eric van, 1994. "Welfare gains from international risksharing," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 175-200, October. [Downloadable!] (restricted)
  16. Tufano, Peter, 1989. "Financial innovation and first-mover advantages," Journal of Financial Economics, Elsevier, vol. 25(2), pages 213-240, December. [Downloadable!] (restricted)
  17. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December. [Downloadable!] (restricted)
  18. Alberto Alesina & Robert Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," Harvard Institute of Economic Research Working Papers 1958, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
    • Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2002. "Optimal Currency Areas," NBER Working Papers 9072, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356 National Bureau of Economic Research, Inc. [Downloadable!]
  19. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Dow, James, 1998. "Arbitrage, Hedging, and Financial Innovation," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 11(4), pages 739-55.
  21. Catherine L. Mann & Ellen E. Meade, 2002. "Home Bias, Transaction Costs, and Prospects for the Euro: A More Detailed Analysis," Peterson Institute Working Paper Series WP02-3, Peterson Institute for International Economics. [Downloadable!]
  22. Ross, Stephen A, 1989. " Institutional Markets, Financial Marketing, and Financial Innovation," Journal of Finance, American Finance Association, vol. 44(3), pages 541-56, July. [Downloadable!] (restricted)
  23. Alberto Alesina & Enrico Spolaore & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December. [Downloadable!] (restricted)
    Other versions:
  24. Boot, Arnoud W A & Thakor, Anjan V, 1993. " Security Design," Journal of Finance, American Finance Association, vol. 48(4), pages 1349-78, September. [Downloadable!] (restricted)
    Other versions:
  25. Demange Gabrielle & Laroque Guy, 1995. "Optimality of Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 65(1), pages 218-232, February. [Downloadable!] (restricted)
  26. Neumeyer, Pablo Andres, 1998. "Currencies and the Allocation of Risk: The Welfare Effects of a Monetary Union," American Economic Review, American Economic Association, vol. 88(1), pages 246-59, March. [Downloadable!] (restricted)
    Other versions:
  27. John Heaton & Deborah Lucas, 2000. "Stock prices and fundamentals," Proceedings, Federal Reserve Bank of San Francisco, issue Apr. [Downloadable!]
    Other versions:
  28. Bisin, Alberto, 1998. "General Equilibrium with Endogenously Incomplete Financial Markets," Journal of Economic Theory, Elsevier, vol. 82(1), pages 19-45, September. [Downloadable!] (restricted)
  29. Cuny, Charles J, 1993. "The Role of Liquidity in Futures Market Innovations," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(1), pages 57-78. [Downloadable!] (restricted)
  30. Kang, Jun-Koo & Stulz, Rene M., 1997. "Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 3-28, October. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Acharya, Viral V & Bisin, Alberto, 2002. "Entrepreneurial Incentives in Stock Market Economies," CEPR Discussion Papers 3474, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by editing a NEP report.

This page was last updated on 2009-11-6.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.