Equilibrium valuation of illiquid assets

John Krainer and Stephen LeRoy

Economic Theory, 2002, vol. 19, issue 2, 223-242

Abstract: We develop an equilibrium model of illiquid asset valuation based on search and matching. We propose several measures of illiquidity and show how these measures behave. We also show that the equilibrium amount of search may be less than, equal to or greater than the amount of search that is socially optimal. Finally, we show that excess returns on illiquid assets are fair games if returns are defined to include the appropriate shadow prices.

Keywords: Asset pricing; Housing prices; Illiquidity; Search. (search for similar items in EconPapers)
JEL-codes: D40 D83 G12 (search for similar items in EconPapers)
Date: 2001-10-29
Note: Received: June 25, 2000; revised version: October 24, 2000
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Citations: View citations in EconPapers (7)

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