Journal of Political Economy  ·  2004  ·  Impact 6

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.

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impact factor6
year_of_publication2004
sourceJournal of Political Economy

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