Portfolio choice and pricing in illiquid markets

• 成果类型: Article
• 署名作者: Garleanu, Nicolae
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2008.07.006
• 发表日期: 2009
• 页码: 532-564
• 关键词: liquidity; discount; portfolio choice; Trading delays; search; transaction costs

摘要

This paper studies portfolio choice and pricing in markets in which immediate trading may be impossible. It departs from the literature by removing restrictions on asset holdings, and finds that optimal positions depend significantly and naturally on liquidity: When expected future liquidity is high, agents take more extreme positions, given that they do not have to hold those positions for long when they become undesirable. Consequently, larger trades should be observed in markets with more frequent trading. Liquidity need not affect the price significantly, however, because liquidity has offsetting impacts on different agents' demands. This result highlights the importance of unrestricted portfolio choice. The paper draws parallels with the transaction-cost literature and clarifies the relationship between the price level and the realized trading frequency in this literature. (C) 2008 Published by Elsevier Inc.