The Role of Trading Frictions in Real Asset Markets
American Economic Review
vol. 101,
no. 4, June 2011
(pp. 1106-43)
Abstract
This paper investigates how trading frictions vary with the thickness of the asset market by examining patterns of asset allocations and prices in commercial aircraft markets. The empirical analysis indicates that assets with a thinner market are less liquid — i.e., more difficult to sell. Thus, firms hold on longer to them amid profitability shocks. Hence, when markets for assets are thin, firms' average productivity and capacity utilization are lower, and the dispersions of productivity and of capacity utilization are higher. In turn, prices of assets with a thin market are lower and have a higher dispersion. (JEL A12, L11, L93)Citation
Gavazza, Alessandro. 2011. "The Role of Trading Frictions in Real Asset Markets." American Economic Review, 101 (4): 1106-43. DOI: 10.1257/aer.101.4.1106Additional Materials
JEL Classification
- A12 Relation of Economics to Other Disciplines
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L93 Air Transportation