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Endogenous Market Thinness and Stock Price Volatility

Pagano, Marco - C.E.P.R. Discussion Papers - 1986

resulting volatility can induce risk-averse transactors who face transaction costs to desert these markets altogether. Thus … thinness and the consequent price volatility may become joint self-perpetuating features of an equity market, whatever the … volatility of asset fundamentals. If, however, appropriate incentive schemes are adopted to encourage entry of additional …

Persistent link: https://www.econbiz.de/10005662005

Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs

Duranton, Gilles; Storper, Michael - C.E.P.R. Discussion Papers - 2005

While transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade.

Persistent link: https://www.econbiz.de/10005504426

Transaction costs and the property rights approach to the theory of the firm

Muller, Daniel; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2014

The standard property rights approach is focused on ex ante investment incentives, while there are no transaction costs that might restrain ex post negotiations. We explore the implications of such transaction costs. Prominent conclusions of the property rights theory may be overturned: A party...

Persistent link: https://www.econbiz.de/10011084198

Where Experience Matters: Asset Allocation and Asset Pricing with Opaque and Illiquid Assets

Buss, Adrian; Uppal, Raman; Vilkov, Grigory - C.E.P.R. Discussion Papers - 2015

Alternative assets, such as private equity, hedge funds, and real assets, are illiquid and opaque, and thus pose a challenge to traditional models of asset allocation. In this paper, we study asset allocation and asset pricing in a general-equilibrium model with liquid assets and an alternative...

Persistent link: https://www.econbiz.de/10011184079

Dynamic Trading with Predictable Returns and Transaction Costs

Garleanu, Nicolae Bogdan; Pedersen, Lasse Heje - C.E.P.R. Discussion Papers - 2009

This paper derives in closed form the optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal updated portfolio is a linear combination of the existing portfolio, the optimal portfolio absent...

Persistent link: https://www.econbiz.de/10004964419

The Euro as an International Currency: Explaining Puzzling First Evidence

Hau, Harald; Killeen, William; Moore, Michael J - C.E.P.R. Discussion Papers - 2000

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest...

Persistent link: https://www.econbiz.de/10005067509

Re-Interpreting the Failure of Foreign Exchange Market Efficiency Tests: Small Transaction Costs, Big Hysteresis Bands

Baldwin, Richard - C.E.P.R. Discussion Papers - 1990

Small transaction costs and uncertainty imply that optimal cross-currency interest rate speculation is marked by a first-order hysteresis band. Consequently uncovered interest parity does not hold and market-efficiency tests based on it are mis-specified. Indeed, measured prediction errors are a...

Persistent link: https://www.econbiz.de/10005661611

Financial Super-Markets: Size Matters for Asset Trade

Martin, Philippe; Rey, Hélène - C.E.P.R. Discussion Papers - 1999

The paper presents a two-country macroeconomic model in which the number of financial assets is endogenous. Imperfect substitutability of assets and international transaction costs give a comparative advantage to large markets, because of demand effects. Agents have more incentives to undertake...

Persistent link: https://www.econbiz.de/10005661923

Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited

Obstfeld, Maurice; Taylor, Alan M. - C.E.P.R. Discussion Papers - 1997

to be positively related to objective measures of market segmentation, notably nominal exchange rate volatility. …

Persistent link: https://www.econbiz.de/10005662194

The Impact of ISO 9000 Diffusion on Trade and FDI: A New Institutional Analysis

Clougherty, Joseph A.; Grajek, Michal - C.E.P.R. Discussion Papers - 2006

The effects of ISO 9000 diffusion on trade and FDI have gone understudied. We employ panel data reported by OECD nations over the 1995-2002 period to estimate the impact of ISO adoptions on country-pair economic relations. We find ISO diffusion to have no effect in developed nations, but to...

Persistent link: https://www.econbiz.de/10005662290