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advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed …-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in …
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We study the impact of parameter uncertainty on the expected utility of a multiperiod investor subject to quadratic transaction costs. We characterize the utility loss associated with ignoring parameter uncertainty, and show that it is equal to the product between the single-period utility loss...
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