Liquidity Premia and Transaction Costs  

Oleh:

Bong-Gyu Jang ; Hyeng Keun Koo ; Hong Liu ; Loewenstein, Mark

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 62 no. 5 (Oct. 2007), page 2329-2366.
Topik: liquidity; liquidity premia; transaction costs
Fulltext: p 2329.pdf (271.18KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Standard literature concludes that transaction costs only have a second - order effect on liquidity premia. We show that this conclusion depends crucially on the assumption of a constant investment opportunity set. In a regime - switching model in which the investment opportunity set varies over time, we explicitly characterize the optimal consumption and investment strategy. In contrast to the standard literature, we find that transaction costs can have a first - order effect on liquidity premia. However, with reasonably calibrated parameters, the presence of transaction costs still cannot fully explain the equity premium puzzle.

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