Non-Marketability and One-Day Selling Lockup
نویسندگان
چکیده
We study the effect of non-marketability on stock prices, and examine a unique repeated non-marketability constraint that lasts for less than one day in China. Chinese stock buyers face a one-day lockup and cannot sell their shares until the next trading day. Using the equity call warrants that are not subject to this trading constraint as a control, we provide evidence that non-marketability lowers the prices of stocks. 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. Our results are consistent with liquidity-based asset pricing theories that the non-marketability constraint lowers equilibrium prices through adversely affecting investor demand.
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