Jankowitsch, Rainer; Nashikkar, Amrut; Subrahmanyam, … - In: Journal of Banking & Finance 35 (2011) 2, pp. 343-357
In this paper, we model price dispersion effects in over-the-counter (OTC) markets to show that, in the presence of inventory risk for dealers and search costs for investors, traded prices may deviate from the expected market valuation of an asset. We interpret this deviation as a liquidity...