Stock Exchange Competition in a Simple Model of Capital Market Equilibrium

36 Pages Posted: 28 Feb 2004 Last revised: 21 Oct 2008

See all articles by Sofia Brito Ramos

Sofia Brito Ramos

ESSEC

Ernst-Ludwig von Thadden

Universitaet Mannheim; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: December 1, 2007

Abstract

This paper uses a simple model of mean-variance asset pricing with transactions costs to analyze one of the main empirical phenomena in stock market competition in the last years, the decrease of transaction costs. We endogenize transactions costs as variables strategically influenced by stock exchanges and model stock market integration as an increase in the correlation of the underlying market returns. Among other things, we find that market integration leads to a decrease of transaction costs and to an increase in trading activity.

Keywords: Stock exchange competition, capital markets equilibrium, transactions cost

JEL Classification: G11, G15, G29

Suggested Citation

Ramos, Sofia Brito and von Thadden, Ernst-Ludwig, Stock Exchange Competition in a Simple Model of Capital Market Equilibrium (December 1, 2007). Available at SSRN: https://ssrn.com/abstract=507702 or http://dx.doi.org/10.2139/ssrn.507702

Sofia Brito Ramos (Contact Author)

ESSEC ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

Ernst-Ludwig Von Thadden

Universitaet Mannheim ( email )

Department of Economics
Mannheim, 68131
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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