Valuing Illiquid Common Stock
Posted: 24 Sep 2008
Date Written: September, 23 2008
Illiquid common stock is worth less than stock that can be readily sold because the investor incurs an opportunity cost by being locked into the investment. Quantifying the amount of this illiquidity discount is an important issue in valuing certain common stock, especially for estate valuations. We examine whether a previously developed analytical model for valuing the lost "option to sell" when a stock is illiquid is a useful, practical tool for valuing illiquid common stock.
Keywords: Equity Investments, Fundamental Analysis and Valuation Models, Alternative Investments, Other
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