NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Impediments to Financial Trade: Theory and Applications

Nicolae Gârleanu, Stavros Panageas, Jianfeng Yu

NBER Working Paper No. 22697
Issued in September 2016, Revised in September 2016
NBER Program(s):Asset Pricing

We propose a tractable model of an informationally inefficient market featuring non-revealing prices, no noise traders, and general assumptions on preferences and payoff distributions. We show the equivalence between our model and a substantially simpler model whereby investors face distortionary investment taxes depending both on their identity and the asset class. This equivalence allows us to account for such phenomena as under-diversification. We further employ the model to assess approaches to performance evaluation, and find that it provides a theoretical basis for some intuitive practices adopted by finance professionals, such as style analysis.

download in pdf format
   (425 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22697

Users who downloaded this paper also downloaded* these:
Kehoe, Pujolas, and Rossbach w22706 Quantitative Trade Models: Developments and Challenges
Jack, Kremer, de Laat, and Suri w22686 Borrowing Requirements, Credit Access, and Adverse Selection: Evidence from Kenya
Daruich, Easterly, and Reshef w22869 The Surprising Instability of Export Specializations
Baron and Xiong w22695 Credit Expansion and Neglected Crash Risk
Bocola and Dovis w22694 Self-Fulfilling Debt Crises: A Quantitative Analysis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us