The Effect of Liquidity on Non-Marketable Securities

11 Pages Posted: 26 Sep 2017 Last revised: 9 Nov 2017

Menachem (Meni) Abudy

Bar-Ilan University - Graduate School of Business Administration

Hadar Binsky

Tel Aviv University

Alon Raviv

Bar-Ilan University - Graduate School of Business Administration

Date Written: November 8, 2017

Abstract

We generalize the prevailing theoretical models that estimate the discount on securities for lack of marketability, by considering the discrete trading frequency of the securities. The generalization shows that accounting for the illiquidity of securities may significantly reduce their non-marketability discount. Further, we show that our method reconciles the approaches to estimating marketability discount of Longstaff (1995) and Finnerty (2012a), by showing that the two are corner and special solutions of our generalized method.

Keywords: non-marketability discount, illiquidity, thin-traded securities

JEL Classification: G01

Suggested Citation

Abudy, Menachem (Meni) and Binsky, Hadar and Raviv, Alon, The Effect of Liquidity on Non-Marketable Securities (November 8, 2017). Available at SSRN: https://ssrn.com/abstract=3042136 or http://dx.doi.org/10.2139/ssrn.3042136

Menachem (Meni) Abudy (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

Hadar Binsky

Tel Aviv University ( email )

Alon Raviv

Bar-Ilan University - Graduate School of Business Administration ( email )

The Graduate School of Business Administration
Ana and Max Web st
Ramat Gan
Israel

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