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Non-marketability and one-day selling lockup

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  • Bian, Jiangze
  • Su, Tie
  • Wang, Jun

Abstract

We examine a unique one day lockup constraint in stock markets in China. Buyers of Chinese stocks are subject to a one day lockup and cannot sell their shares until the next day, but warrant traders are free of such restrictions. We demonstrate that the lockup creates a price discount relative to stock value implied by warrants. We show that the discount decreases throughout the trading day and investors tend to purchase stocks when the lockup becomes less binding. We also find the non-marketability discount in the Huaxia 50 ETF market, with help from the newly introduced ETF options in China.

Suggested Citation

  • Bian, Jiangze & Su, Tie & Wang, Jun, 2022. "Non-marketability and one-day selling lockup," Journal of Empirical Finance, Elsevier, vol. 65(C), pages 1-23.
    • Handle: RePEc:eee:empfin:v:65:y:2022:i:c:p:1-23
    DOI: 10.1016/j.jempfin.2021.10.006
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    Cited by:

    1. Chen, Zhiyu & Xu, Yun & Wang, Yu, 2023. "Can convertible bond trading predict stock returns? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Non-marketability discount; Liquidity; Selling lockup;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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