Why are some assets more than than liquid than others? enounce how information asymmetries can cause grocerys to collapse/ reduce in liquid. Part One: When a person invests in a monetary institution, the institution in turn invests this money w here they stir fit. Their aim: to earn interest on the money, over and above the guaranteed rate of return they have promised their clients; hence making a profit for themselves. The more money these institutions have at their disposal the better. They at that placefore develop a set of packages with the aim of attracting as much investment from the public, into their company, as possible. The liquidity of these assets, along with their specialty return varies. To make the most gain, one must localise their money to the institution for a relatively longer end of time i.e.: reducing their assets liquidity. Investments which require more accessibility, can distinctly not be invested long term by the pecuniary institution , leading to understandably lower rates of return for this more liquid asset.
Herring defined the liquidity of an asset as follows:         The liquidity of an asset depends on the percentage of plentiful commercialize value which can be realized if it is sold on brief notice, where practiced market value is defined as the maximum price that any potential buyer would be willing to pay if the owner of the asset could take as much time as necessary to locate the highest bidder here the focus is on time, the quicker an asset can be converted into cash at its full market value, the great its liqui dity. Time is one of the main determinants o! f an assets liquidity but at that place are a variety of other issues, which determine the assets liquidity as well. The exact characteristics of the asset have an effect. The more gip term the asset is, If you want to get a full essay, order it on our website:
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