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The role of trading frictions in real asset markets

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  • Gavazza, Alessandro

Abstract

This paper investigates how trading frictions vary with the thickness of the asset market by examining patterns of asset allocations and prices in commercial aircraft markets. The empirical analysis indicates that assets with a thinner market are less liquid—i.e., more difficult to sell. Thus, firms hold on longer to them amidst profitability shocks. Hence, when markets for assets are thin, firms’ average productivity and capacity utilization are lower, and the dispersions of productivity and of capacity utilization are higher. In turn, prices of assets with a thin market are lower and have a higher dispersion.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25781.

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Date of creation: Jan 2010
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Handle: RePEc:pra:mprapa:25781

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Keywords: decentralized markets; search; productivity; asset prices; aircraft.;

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References

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Citations

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Cited by:
  1. Gavazza, Alessandro & Lizzeri, Alessandro & Rokestkiy, Nikita, 2012. "A quantitative analysis of the used-car market," MPRA Paper 38414, University Library of Munich, Germany.
  2. Wong, Maisy, 2013. "Estimating the Distortionary Effects of Ethnic Quotas in Singapore Using Housing Transactions," MPRA Paper 51217, University Library of Munich, Germany.
  3. Murillo Campello & Erasmo Giambona, 2011. "Capital Structure and the Redeployability of Tangible Assets," Tinbergen Institute Discussion Papers 11-091/2/DSF24, Tinbergen Institute.
  4. Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 261-282, October.
  5. Gavazza, Alessandro, 2010. "Asset liquidity and financial contracts: Evidence from aircraft leases," Journal of Financial Economics, Elsevier, vol. 95(1), pages 62-84, January.
  6. Myrto Kalouptsidi, 2011. "Time to Build and Shipping Prices," 2011 Meeting Papers 661, Society for Economic Dynamics.
  7. Pablo Kurlat, 2013. "Lemons Markets and the Transmission of Aggregate Shocks," American Economic Review, American Economic Association, vol. 103(4), pages 1463-89, June.
  8. repec:dgr:uvatin:2011091 is not listed on IDEAS
  9. André Kurmann, 2009. "Holdups and Overinvestment in Physical Capital Markets," Cahiers de recherche 0904, CIRPEE.
  10. Hendershott, Terrence & Menkveld, Albert J., 2010. "Price pressures," CFS Working Paper Series 2010/14, Center for Financial Studies (CFS).
  11. Briana Chang, 2011. "Adverse Selection and Liquidity Distortion in Decentralized Markets," 2011 Meeting Papers 157, Society for Economic Dynamics.
  12. Murillo Campello & Erasmo Giambona, 2012. "Real Assets and Capital Structure," NBER Working Papers 18147, National Bureau of Economic Research, Inc.

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