Non-Marketability and One-Day Selling Lockup

56 Pages Posted: 11 Feb 2015 Last revised: 2 Nov 2017

See all articles by Jiangze Bian

Jiangze Bian

University of International Business and Economics (UIBE)

Tie Su

University of Miami - Department of Finance

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: October 2017

Abstract

We extend previous studies on the effect of non-marketability on stock prices, and examine a very unique short-lived repeating non-marketability that lasts for only less than one day in China. Using the equity call warrants that are not subject to this trading constraint as a control, we provide evidence that such a one-day trading lockup prices a stock at a discount to the stock value implied from the warrants. We further show that the discount decreases throughout the trading day and that investors tend to purchase more stocks when the one-day trading lockup becomes less binding toward the market close. The findings suggest that, in line with the liquidity-based asset pricing theories, one channel through which the non-marketability constraint causes the price discount is that the restriction on asset liquidity or marketability may adversely affect investor demand, thus lowering the equilibrium price.

Keywords: non-marketability discount, liquidity, selling lockup

JEL Classification: G12, G14, G18

Suggested Citation

Bian, Jiangze and Su, Tie and Wang, Jun, Non-Marketability and One-Day Selling Lockup (October 2017). Asian Finance Association (AsianFA) 2015 Conference Paper, Available at SSRN: https://ssrn.com/abstract=2563312 or http://dx.doi.org/10.2139/ssrn.2563312

Jiangze Bian (Contact Author)

University of International Business and Economics (UIBE) ( email )

10, East Huixin Street, Chaoyang District
Beijing, 100029
China

Tie Su

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-1885 (Phone)
305-284-4800 (Fax)

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

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