Equilibrium interest rate and liquidity premium with transaction costs |
| |
Authors: | Dimitri Vayanos Jean-Luc Vila |
| |
Institution: | (1) MIT Sloan School of Management, 50 Memorial Drive E52-437, Cambridge, MA 02142, USA (e-mail:dimitriv@mit.edu), US;(2) Convergence Asset Management, 475 Steamboat Road, Greenwich, CT 06830, USA, US |
| |
Abstract: | Summary. In this article we study the effects of transaction costs on asset prices. We assume an overlapping generations economy with
two riskless assets. The first asset is liquid while the second asset carries proportional transaction costs. We show that
agents buy the liquid asset for short-term investment and the illiquid asset for long-term investment. When transaction costs
increase, the price of the liquid asset increases. The price of the illiquid asset decreases if the asset is in small supply,
but may increase if the supply is large. These results have implications for the effects of transaction taxes and commission
deregulation.
Received: December 5, 1997; revised version: March 19, 1998 |
| |
Keywords: | and Phrases: Transaction costs Asset pricing General equilibrium Overlapping generations JEL Classification Numbers: D51 G12 |
本文献已被 SpringerLink 等数据库收录! |
|