Asset Prices and Trading Volume Under Fixed Transactions Costs
Posted: 3 Sep 2004
There are 3 versions of this paper
Asset Prices and Trading Volume Under Fixed Transactions Costs
EFA 2001 Barcelona Meetings; Yale ICF Working Paper No. 00-35
Number of pages: 78
Posted: 07 Jun 2001
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1,882
Asset Prices and Trading Volume Under Fixed Transactions Costs
NBER Working Paper No. w8311
Number of pages: 78
Posted: 03 Jun 2001
Last Revised: 18 Sep 2022
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139
Abstract
We propose a dynamic equilibrium model of asset prices and trading volume when agents face fixed transactions costs. We show that even small fixed costs can give rise to large "no-trade" regions for each agent's optimal trading policy. The inability to trade more frequently reduces the agents' asset demand and in equilibrium gives rise to a significant illiquidity discount in asset prices.
Suggested Citation: Suggested Citation
Lo, Andrew W. and Mamaysky, Harry and Wang, Jiang, Asset Prices and Trading Volume Under Fixed Transactions Costs. Journal of Political Economy, Vol. 112, pp. 1054-1090, October 2004, Available at SSRN: https://ssrn.com/abstract=585768
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