Financial Super-Markets: Size Matters for Asset Trade

Philippe Martin and Helene Rey

CEP Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: International macroeconomics; asset trade; transaction costs; incomplete markets (search for similar items in EconPapers)
Date: 2000-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://cep.lse.ac.uk/pubs/download/DP0450.pdf (application/pdf)

Related works:
Journal Article: Financial super-markets: size matters for asset trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2004)
Working Paper: Financial super-markets: size matters for asset trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2001)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2001)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial super-markets: size matters for asset trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0450

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