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This paper develops a search-theoretic model of the cross-sectional distribution of asset returns, abstracting from risk premia and focusing exclusively on liquidity. In contrast with much of the transaction-cost literature, it is not assumed that different assets carry different exogenously specified trading costs. Instead, different expected returns, due to liquidity, are explained by the equilibrium cross-sectional variation in the distribution of ownership. The qualitative predictions of the model are consistent with much of the empirical evidence. An analysis of the dynamic impact of unexpected news sheds light on time variation in liquidity.