Transaction Costs and Liquidity PDF Download

Author: Carlos Perez-Verdia
Publisher:
ISBN:
Category : Liquidity (Economics)
Languages : en
Pages :

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Author: Mr.Raphael A. Espinoza
Publisher: International Monetary Fund
ISBN: 1484392337
Category : Business & Economics
Languages : en
Pages : 38

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Book Description
We show that, in a monetary equilibrium, trade and asset prices depend on both the supply of the liquidity by the Central Bank and the liquidity of assets and commodities. As a result, monetary aggregates are informative for the conduct of monetary policy. We also show asset prices are higher in liquidity-constrained states of nature. This generates a term premium even in absence of aggregate uncertainty. These results hold in any monetary economy with heterogeneous agents and short-term liquidity effects, where monetary costs act as transaction costs and the quantity theory of money is verified.

Author: Yakov Amihud
Publisher: Now Publishers Inc
ISBN: 1933019123
Category : Business & Economics
Languages : en
Pages : 109

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Book Description
Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.

Author: Ming Guo
Publisher:
ISBN:
Category : Liquidity (Economics)
Languages : en
Pages : 390

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Author: François-Serge Lhabitant
Publisher: John Wiley & Sons
ISBN: 0470181699
Category : Business & Economics
Languages : en
Pages : 502

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Book Description
Brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares trade, etc), order based measures and price impact measures.

Author: Deniz Anginer
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Liang Wang
Publisher: International Monetary Fund
ISBN: 1475572336
Category : Business & Economics
Languages : en
Pages : 54

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Book Description
We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Buyers can use cash or credit, with the former (latter) subject to the inflation tax (transaction costs). Frictions that make the choice of payment method interesting also imply equilibrium price dispersion. We deliver closed-form solutions for money demand. We then show the model can simultaneously account for the price-change facts, cash-credit shares in micro payment data, and money-interest correlations in macro data. We analyze the effects of inflation on welfare, price dispersion and markups. We also describe nonstationary equilibria as self-fulfilling prophecies, which is standard, except here it entails dynamics in the price distribution.

Author: Georg Pristas
Publisher: Cuvillier Verlag
ISBN: 3736926790
Category : Business & Economics
Languages : en
Pages : 164

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Book Description
“Liquidity, in the sense of asset liquidity, is an essential characteristic of a well working financial market. In fact, the absence of liquidity can influence the trading process considerably. The simple situation that an investor is not able to sell any given amount of assets at a given point of time can cause a financial distress even up to its insolvency. From this point of view, asset liquidity can be seen as the life elixir of financial markets.“ Georg Pristas presents in his thesis a new approach to measure asset liquidity based on the dynamical changes of the limit order book. He provides a substantial analysis of the model and verifies its measurement power. In addition he shows several aspects and uses of the concept.

Author: Deniz Anginer
Publisher:
ISBN:
Category :
Languages : en
Pages : 56

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Book Description
Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a unique data set containing two million trades, this paper investigates the relationship between holding periods and transaction costs for 66,000 households from a large discount brokerage. The author finds that transaction costs are an important determinant of investors' holding periods, after controlling for household and stock characteristics. The relationship between holding periods and transaction costs is stronger among more sophisticated investors. Households with longer holding periods earn significantly higher returns after amortized transaction costs, and households that have holding periods that are positively related to transaction costs earn both higher gross and net returns. The author shows that there is correlation in the demand for liquid assets across households and, consistent with the notion of flight to liquidity, this demand increases during times of low market liquidity. Households with higher incomes and with higher wealth invested in the stock market supply liquidity when market liquidity is low.

Author: Ian Domowitz
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
Relationships between trading cost, technology, and the nature of intermediation in the trading services industry are discussed. Electronic markets are linked to reductions in trading costs. Lower explicit costs are related to system development and operating costs. Electronic order book information is identified as a means of realizing implicit cost savings. The concept of liquidity management in electronic environments is introduced, and its potential is empirically illustrated. The empirical results suggest new roles for brokerage and exchange operations, and competition between the two. Competitive advantage with respect to the provision of liquidity management services is compared across types of intermediaries.