Publication Type
Journal Article
Version
acceptedVersion
Publication Date
4-2021
Abstract
This paper proposes a theory of endogenous differences in liquidity of assets based on the interaction between differences in the risk of assets and differences in liquidity needs of investors. An equilibrium of the model, which always exists and is unique, displays a class structure, where investors’ types sort themselves across different types of assets. I also provide a detailed analysis of the possible types of sorting and of the consequences for the cross-sectional properties of asset prices and their velocity. The framework can also be useful to think about what constitute a ""light-to-liquidity" and a "safe asset".
Keywords
Asset Prices, Classes, Liquidity
Discipline
Behavioral Economics | Political Economy
Research Areas
Applied Microeconomics
Publication
Journal of Political Economy
Volume
129
Issue
4
First Page
1100
Last Page
1156
ISSN
0022-3808
Identifier
10.1086/712736
Publisher
University of Chicago Press
Citation
JACQUET, Nicolas L..
Asset classes. (2021). Journal of Political Economy. 129, (4), 1100-1156.
Available at: https://ink.library.smu.edu.sg/soe_research/2291
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1086/712736