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Cross-listed Securities and Multiple Exchange Memberships: Demand Differentiability and Equilibrium Existence

Author

Listed:
  • Faias Marta

    (Universidade Nova de Lisboa, FCT and CMA, Lisbon, Portugal)

  • Luque Jaime

    (University of Wisconsin - Madison, 5259 Grainger Hall, 975 University Avenue, Madison, WI 53706, USA)

Abstract

The previous literature on general equilibrium has assumed that all traders belong to a single market. However, traders often participate in more than one exchange to diversify their portfolios. Moreover, there is evidence that the security listings of exchanges overlap. Our model captures these facts: there are multiple exchanges, the same security is listed in different exchanges, and traders can belong to more than one exchange. We show that, in the presence of convex transaction costs, there exists an equilibrium, and that individual demand is a continuously differentiable function in prices.

Suggested Citation

  • Faias Marta & Luque Jaime, 2018. "Cross-listed Securities and Multiple Exchange Memberships: Demand Differentiability and Equilibrium Existence," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-12, January.
    • Handle: RePEc:bpj:bejtec:v:18:y:2018:i:1:p:12:n:12
    DOI: 10.1515/bejte-2016-0114
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    References listed on IDEAS

    as
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    4. Herakles M. Polemarchakis & Paolo Siconolfi, 1995. "Generic existence of competitive equilibria when the asset market is incomplete: A symmetric argument," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(3), pages 495-510.
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    More about this item

    Keywords

    multiple exchange memberships; cross-listings; equilibrium existence; demand differentiability;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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