Liquidity as Social Expertise / Pablo Kurlat.

Format:

Book

Author/Creator:

Kurlat, Pablo.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21118.

NBER working paper series no. w21118

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

This paper proposes a theory of liquidity dynamics. Illiquidity results from asymmetric information. Observing the historical track record teaches agents how to interpret public information and helps overcome information asymmetry. There can be an illiquidity trap: too much asymmetric information leads to the breakdown of trade, which interrupts learning and perpetuates illiquidity. Liquidity falls in response to unexpected events that lead agents to question their valuation models, especially in newer markets, may be slow to recover after a crisis and is higher in periods of stability.

Notes:

Print version record

April 2015.