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On the irrelevance of financial policy under market incompleteness and trading constraints

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  • Atesagaoglu, Orhan Erem
  • Carceles-Poveda, Eva

Abstract

We study the Modigliani and Miller Theorem under portfolio constraints. We show that there exist state-dependent trading limits under which financial policy is irrelevant. In addition, a no short-selling constraint on equity is innocuous in spite of being state-independent.

Suggested Citation

  • Atesagaoglu, Orhan Erem & Carceles-Poveda, Eva, 2015. "On the irrelevance of financial policy under market incompleteness and trading constraints," Economics Letters, Elsevier, vol. 136(C), pages 125-128.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:125-128
    DOI: 10.1016/j.econlet.2015.09.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial policy; Incomplete markets; Trading constraints;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • G1 - Financial Economics - - General Financial Markets

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