Risk-averse individuals wish that assets concentrate their payoffs in states of high marginal value (that is, highly likely or low endowment states). An asset or portfolio may fail to do so, by having payoffs uncorrelated to its owner needs or, even worse, by having them inversely related. The...

This note shows that according to Lipmann and McCall´s (1986) operational definition of liquidity, incomplete markets are a necessary condition for illiquidity.