Equilibrium valuation of illiquid assets |
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| Authors: | John Krainer Stephen F. LeRoy |
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| Affiliation: | (1) Economic Research, Federal Reserve Bank of San Francisco, San Francisco, CA 94105, USA (e-mail: john.krainer@sf.frb.org) , US;(2) Economics Department, University of California at Santa Barbara, Santa Barbara, CA 93106, USA (e-mail: sleroy@econ.ucsb.edu) , US |
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| Abstract: | Summary. We develop an equilibrium model of illiquid asset valuation based on search and matching. We propose several measures of illiquidity and show how these measures behave. We also show that the equilibrium amount of search may be less than, equal to or greater than the amount of search that is socially optimal. Finally, we show that excess returns on illiquid assets are fair games if returns are defined to include the appropriate shadow prices. Received: June 25, 2000; revised version: October 24, 2000 |
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| Keywords: | and Phrases: Asset pricing Housing prices Illiquidity Search. |
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