We propose a dynamic equilibrium model of asset prices and trading volume when agents face fixed transactions costs. We show that even small fixed costs can give rise to large "no-trade" regions for each agent's optimal trading policy. The inability to trade more frequently reduces the agents' asset demand and in equilibrium gives rise to a significant illiquidity discount in asset prices.
Lo, Andrew, Harry Mamaysky, and Jiang Wang. "Asset prices and trading volume under fixed transactions costs." Journal of Political Economy 112, no. 5 (2004): 1054-1090.
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