Article ID Journal Published Year Pages File Type
957679 Journal of Economic Theory 2008 31 Pages PDF
Abstract
This 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.
Keywords
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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