What's Wrong with Pittsburgh? Delegated Investors and Liquidity Concentration

53 Pages Posted: 15 Mar 2019 Last revised: 13 Jan 2020

See all articles by Andra C. Ghent

Andra C. Ghent

University of Utah - David Eccles School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 10, 2020

Abstract

What makes an asset institutional-quality? This paper proposes that one reason is the existing concentration of delegated investors in a market through a liquidity channel. Consistent with this intuition, it documents differences in investor composition across US cities and shows that delegated investors concentrate their investments in cities with higher turnover. It then estimates a search model showing how heterogeneity in liquidity preferences makes some markets more liquid even when assets have identical cash flows. The paper provides evidence for clientele equilibria arising in frictional asset markets and suggests that a liquidity channel may explain divergent paths in city development.

Keywords: Delegated Asset Managers; Liquidity; Alternative Asset Classes

JEL Classification: G11; G12; R33

Suggested Citation

Ghent, Andra C., What's Wrong with Pittsburgh? Delegated Investors and Liquidity Concentration (January 10, 2020). 9th Miami Behavioral Finance Conference 2018, Available at SSRN: https://ssrn.com/abstract=3049118 or http://dx.doi.org/10.2139/ssrn.3049118

Andra C. Ghent (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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