Can large long-term investors capture illiquidity premiums
In this paper we perform a literature study to assess whether large longterm investors can benefit from liquidity premiums in different asset classes. We both describe the theoretical predictions on liquidity premiums and portfolio choice with illiquidity, as well as empirical evidence on liquidity premiums. We document that expected liquidity premiums in stocks have diminished in recent years and are hard to capture for large investors. In corporate and government bond markets there are more opportunities to exploit liquidity premiums. The evidence on liquidity premiums in alternative investment classes is scarce.
This paper incorporates labor search frictions into a model with lumpy capital to explain a set of stylized facts about the United States labor market dynamics over business cycles. All of these facts are related to …rm size: (1) job creation is procyclical in both small and large …rms; (2) job destruction is countercyclical in large …rms, but, paradoxically, it is procyclical in small …rms; and (3) job creation and job destruction are more volatile in large …rms than in small …rms. The model is calibrated to US data and its predictions are broadly consistent with the facts. The success of the model relies on the interaction between labor search and lumpy capital. Search frictions imply that even if two …rms have the