Gavazza, Alessandro (2010): The role of trading frictions in real asset markets.
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This paper investigates how trading frictions vary with the thickness of the asset market by examining patterns of asset allocations and prices in commercial aircraft markets. The empirical analysis indicates that assets with a thinner market are less liquid—i.e., more difficult to sell. Thus, ﬁrms hold on longer to them amidst proﬁtability shocks. Hence, when markets for assets are thin, ﬁrms’ average productivity and capacity utilization are lower, and the dispersions of productivity and of capacity utilization are higher. In turn, prices of assets with a thin market are lower and have a higher dispersion.