The New Wave of Liquidity: Impact of Friction

Journal of Financial Transformation, Vol. 14, pp. 51-59, August 2005

9 Pages Posted: 13 Sep 2005 Last revised: 8 Jul 2009

Abstract

On the fourth anniversary of the original paper by Shojai and Hahn we will look at whether any of the predictions made in that article have come true. The authors suggested that revolutionary technologies, such as the Internet and wireless devices, would over time make it possible to derive value from previously less liquid or even unrecognized assets, and that the aggregate effect of such value liberation would be "a new wave of liquidity, which will engulf the global economy and result in substantial increases in liquidity around the world." They further suggested that for this value liberation to take place, each of these previously illiquid, and in certain circumstances even unrecognized, assets would need to go through a four-step process: reduction in friction, value release, asset pricing, and asset recognition. We find in this paper that while a number of these predictions have come true, the degree of transformation that was envisioned in the original article are still far from becoming a reality.

Suggested Citation

Shojai, Shahin and Wang, Sam S., The New Wave of Liquidity: Impact of Friction. Journal of Financial Transformation, Vol. 14, pp. 51-59, August 2005. Available at SSRN: https://ssrn.com/abstract=798248

Shahin Shojai (Contact Author)

Capco Institute ( email )

Dubai
United Arab Emirates

Sam S. Wang

Capco ( email )

120 Broadway, 15th Floor
New York, NY 10271
United States

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