Asset Safety versus Asset Liquidity
Bibliographic Data
| ID | 10183293 |
|---|---|
| Authors | Athanasios Geromichalos (University of California, Davis), Lucas Herrenbrueck (0000-0001-8039-5011, Simon Fraser University), Sukjoon Lee (0000-0001-7737-077X, New York University) |
| Year | 2022 |
| Volume | 131 |
| Issue | 5 |
| Pages | 1172-1212 |
| Publication date | 2022-08-30 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/722225 |
| OpenAlex | W2913389933 |
| Language | EN |
| References cited | 40 |
Many economists assume that safer assets are more liquid, and some have practically used "safe" and "liquid" as synonyms. But these terms are not synonyms, and mixing them up can lead to confusion and wrong policy recommendations. We build a multiasset model where an asset's safety and liquidity are well defined and distinct, and we examine their relationship in general equilibrium. We show that the common belief that "safety implies liquidity" is generally justified but also identify conditions under which this relationship can be reversed. We use our model to rationalize, qualitatively and quantitatively, a prominent safety-liquidity reversal observed in the data
Actuarial science · Asset (computer security · Business · Computer security · Confusion · Economics · Liquidity crisis · Liquidity risk · Market liquidity · Monetary economics · SAFER · Banking stability, regulation, efficiency · Computer Science · Economic theories and models · Economic Theory and Policy · Psychology
| Citation velocity | historical |
|---|---|
| Highly cited | No |