TY  - JOUR
AU  - Duffie,Darrell
AU  - Strulovici,Bruno
TI  - Capital Mobility and Asset Pricing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17296
PY  - 2011
Y2  - August 2011
UR  - http://www.nber.org/papers/w17296
L1  - http://www.nber.org/papers/w17296.pdf
N1  - Author contact info:
Darrell Duffie
Graduate School of Business
Stanford University
Stanford, CA  94305-5015
Tel: 650/723-1976
Fax: 650/725-7979
E-Mail: duffie@stanford.edu

Bruno Strulovici
Economics Department
Northwestern University
Evanston IL 60201
E-Mail: b-strulovici@northwestern.edu
AB  - 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.
ER  -