Financial super-markets: size matters for asset trade

Martin, Philippe and Rey, Helene (2000) Financial super-markets: size matters for asset trade. CEPDP (450). Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753013657

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Abstract

The paper presents a two-country macroeconomic model in which the number of financial assets is endogenous. Imperfect substitutability of assets and international transaction costs give a comparative advantage to large markets, because of demand effects. Agents have more incentives to undertake risky investments on those markets; they can also diversify risk at a lower cost. Prices of financial assets are higher in the large area because asset markets are broader. We also analyse the impact of domestic transaction costs and issuing costs on financial markets and returns. Our theory has important implications for the pattern of international trade in risky assets.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2000 the authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HF Commerce
Sets:	Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited:	30 Jul 2008 15:50
Last Modified:	26 Apr 2021 11:49
URI:	http://eprints.lse.ac.uk/id/eprint/20197

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