Capital Mobility and Asset Pricing

Darrell Duffie and Bruno Strulovici

No 17296, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a model for the equilibrium movement of capital between asset markets that are distinguished only by the levels of capital invested in each. Investment in that market with the greatest amount of capital earns the lowest risk premium. Intermediaries optimally trade off the costs of intermediation against fees that depend on the gain they can offer to investors for moving their capital to the market with the higher mean return. Those fees also depend on the bargaining power of the investor, in light of potential alternative intermediaries. In equilibrium, the speeds of adjustment of mean returns and of capital between the two markets are increasing in the degree to which capital is imbalanced between the two markets.

JEL-codes: D4 D53 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-bec
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Darrell Duffie & Bruno Strulovici, 2012. "Capital Mobility and Asset Pricing," Econometrica, Econometric Society, vol. 80(6), pages 2469-2509, November.

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Related works:
Journal Article: Capital Mobility and Asset Pricing (2012)
Working Paper: Capital Mobility and Asset Pricing (2009)
Working Paper: Capital Mobility and Asset Pricing (2009)
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