Yaping Wang and Liansheng Wu

GuanghuaSchoolof Management

(PekingUniversity,Beijing100871,China)

Abstract:We investigate the pure illiquidity discount, rather than the joint effect of illiquidity and corporate control. Also, we empirically decompose the total illiquidity discount into the liquidity premium and the benchmark illiquidity discount as compared to the fully liquid market. Our findings are consistent with theoretical predictions.

Keywords:Liquidity premium; Illiquidity discount; Asset pricing