TY  - JOUR
AU  - Martin,Philippe
AU  - Rey,Helene
TI  - Financial Super-Markets: Size Matters for Asset Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8476
PY  - 2001
Y2  - September 2001
UR  - http://www.nber.org/papers/w8476
L1  - http://www.nber.org/papers/w8476.pdf
N1  - Author contact info:
Philippe Martin
Sciences Po
27, rue Saint-Guillaume
75007 Paris
France
E-Mail: philippe.martin@sciences-po.fr

Helene Rey
London Business School
Regents Park
London NW1 4SA
UNITED KINGDOM
Tel: 44 2070008412
E-Mail: hrey@london.edu
AB  - We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is endogenous, and cross-border asset trade entails transaction costs. We show that demand effects have important implications for the link between market size, asset prices and financial market development. These effects are consistent with existing empirical evidence. Due to co-ordination failures, the extent of financial market incompleteness is inefficiently high. We also analyze the impact of domestic transaction costs and issuing costs on financial markets and returns.
ER  -