Financial Super-Markets: Size Matters for Asset Trade

Philippe Martin () and Helene Rey ()

International Finance from EconWPA

Abstract: This paper presents a new theoretical framework to analyze=20 financial markets in an international context. We build a two-country=20 macroeconomic model in which agents are risk averse, assets are imperfect=20 substitutes, the number of financial assets is endogenous, and cross-border= =20 asset trade entails transaction costs. We show that demand effects have=20 important implications for the link between market size, asset prices and=20 financial market development. These effects are consistent with the=20 existing empirical evidence. Due to co-ordination failures, the extent of=20 financial market incompleteness is inefficiently high. We also analyze the= =20 impact of domestic transaction costs and issuing costs on financial markets= =20 and returns.

JEL-codes: F4 F12 G1 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2001-02-09
Note: 28 pages, Acrobat .pdf
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http://129.3.20.41/eps/if/papers/0012/0012001.pdf (application/pdf)

Related works:
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (1999)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2001)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Journal Article: Financial super-markets: size matters for asset trade (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0012001

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