The role of trading frictions in real asset markets

Alessandro Gavazza

MPRA Paper from University Library of Munich, Germany

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 amidst 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.

Keywords: decentralized markets; search; productivity; asset prices; aircraft. (search for similar items in EconPapers)
JEL-codes: C78 D83 E22 G12 L62 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: The Role of Trading Frictions in Real Asset Markets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25781

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