Financial Market Frictions : A Reprint from the ¿Economic Review¿

Defined as anything that interferes with trade, financial market frictions (FMF) can exist even in efficient markets. FMF generate real costs to investors, generate business opportunities, & change over time. FMF depend in part on market structure. Market structure tends to evolve over time, as trading volume increases, from low fixed costs & high marginal costs to high fixed costs & low marginal costs. The authors classify & discuss 5 categories of FMF: transactions costs, taxes & regulations, asset indivisibility, non-traded assets, & agency & info. problems. FMF impose utility costs on investors by making preferable investment portfolios unattainable. Investors who ignore market FMF compound the harm done by the FMF themselves. Illustrations.DeGennaro, Ramon P. is the author of 'Financial Market Frictions : A Reprint from the ¿Economic Review¿', published 2008 under ISBN 9781422319871 and ISBN 1422319873.