FIN-03-041 |
NYU Stern School of Business |
September 2003
Darrell Duffie, Nicolae Garleanu and Lasse Heje Pedersen
ABSTRACT
We provide the impact on asset prices of trade by
search and bargaining. Under natural conditions, prices are higher if
investors can find each other more easily, if sellers have more
bargaining power, or if the fraction of qualified owners is greater.
If agents face risk limits, then higher volatility leads to greater
difficulty locating unconstrained buyers, resulting in lower prices.
Information can fail to be revealed through trading when search is
difficult. We discuss a variety of financial applications and testable
implications.
Darrell Duffie
Institution: Graduate School of Business, Stanford University, Stanford, CA 94305-5015
Email: duffie@stanford.edu
Nicolae Garleanu
Institution: Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA
19104-6367
Email: garleanu@wharton.upenn.edu
Lasse Heje Pedersen
Institution: Stern School of Business, New York University
Phone: (212) 998-0359
Fax: (212) 995-4233
Email: lpederse@stern.nyu.edu
Home Page: http://www.stern.nyu.edu/~lpederse
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