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The role of trading frictions in real asset markets

Gavazza, Alessandro (2011) The role of trading frictions in real asset markets. American Economic Review, 101 (4). pp. 1106-1143. ISSN 0002-8282

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Identification Number: 10.1257/aer.101.4.1106


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 amid 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

Item Type: Article
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Additional Information: © 2011 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
JEL classification: A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation
Date Deposited: 18 Feb 2014 16:00
Last Modified: 20 Aug 2021 01:48

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