Stock Exchange Competition in a Simple Model of Capital Market Equilibrium

Sofia Ramos and Ernst-Ludwig von Thadden

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: This paper uses a simple model of mean-variance asset pricing with transaction costs to analyze one of the main empirical phenomena in stock market competition in the last years, the decrease of transaction costs. We endogenize transaction costs as variables strategically influenced by stock exchanges and model stock market integration as an increase in the correlation of the underlying stock market returns. Among other things, we find that market integration leads to a decrease of transaction costs and to an increase in long-term trading activity.

Keywords: Stock Exchange Competition; Capital Markets Equilibrium; Transaction Costs (search for similar items in EconPapers)
JEL-codes: G11 G15 G29 (search for similar items in EconPapers)
Date: 2003-11
New Economics Papers: this item is included in nep-fin and nep-fmk
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Stock exchange competition in a simple model of capital market equilibrium (2008)
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