Liquidity constraints and partial risk-sharing are often indistinguishable. However, I illustrate using artificial data from two different model economies how band spectrum regression can be used to distinguish between lack of consumption insurance and liquidity constraints. JEL Classifications: D1, E21.

Merrill Lynch Bank USA has a multibillion dollar portfolio of revolving credit-line commitments with over 100 institutions. These credit lines give corporations access to a specified amount of cash for short-term funding needs. A key risk associated with credit lines is liquidity risk, or the risk that the bank will need to provide significant assets to the borrowers on short notice. We develop...

We present a useful new mechanism that facilitates the atomic exchange of many large baskets of securities in a combinatorial exchange. Cryptography prevents information about the securities in the baskets from being exploited, enhancing trust. Our exchange offers institutions who wish to trade large positions a new alternative to existing methods of block trading: they can reduce transaction c...

This paper o¤ers a monetary theory of asset liquidity— one that emphasizes the role of assets in payment arrangements— and it explores the implications of the theory for the relationship between assets’ intrinsic characteristics and liquidity, and the e¤ects of policy on asset prices and welfare. The environment is a random-matching economy where risk-free bonds coexist with a risky asset, equi...

The present paper investigates the portfolio allocation decisions of an investor with infinite horizon when available financial assets differ in their degrees of liquidity. A model with risk neutral agents allows us to endogenously determine the liquidity premium. With risk averse agents, we develop a nontrivial portfolio allocation problem, which enables us to calculate the demand for an illiq...

In Chapter 1, we seek to understand the relation between liquidity and market imperfections from two dimensions: 1) Across liquidity measures, we compare the influence of imperfections on two commonly used measures, Kyle's lambda and price reversal; 2) Across imperfections, we study the interaction between two sources of market imperfection, information asymmetry and participation cost. We show...

This research, which is based on a survey of savings and credit unions funded by the Directorate Cooperatives Small Medium Enterprises, aims to identify assess how risk, working capital, internal control affect liquidity. Secondary data from Ministry Enterprises served as foundation for this study's data. The quantitative research methodology was employed in study. findings study demonstrate th...

This paper discusses liquidity regulation when short-term funding is the marginal funding source of credit growth but generates negative systemic risk externalities. It studies the relative merits of price versus quantity tools, showing that a second best solution may generally involve the use of both types of tools. When banks differ in their credit opportunities, a Pigovian tax on short-term ...

a r t i c l e i n f o This paper reexamines the liquidity effect on stock expected returns in the NYSE over the period 1926–2008, the pre-1963 period, for which there is a lack of research, and the post-1963 period. The results from the entire sample of 1926–2008 show that expected returns increase with the stock level illiquidity. However, illiquidity level has explanatory power in the cross-s...