Research On The Valuation Of Liquidity Discount Rate Of Chi Next Restricted Stock

There are some pressing and wide range of applications about the valuation of liquidity discount rate of China ChiNext restricted stock.For example,the stock-pledged loans are the very usual method of financing in the security market.The restricted stock accounts for 34% of all stock-pledged loans,and about a half of the tradeable stock.The restricted stock owners are mostly block holders and it is hard to sell these shares.Furthermore,they did not want to lose the control of their company.So,that's why stock-pledged loans are greatly needed in the market.All in all,it is vital to value the restricted shares.This paper reviewed the literature of ChiNext and the restricted stock and analyzed the differences between them,that is,liquidity.For the pricing of restricted shares,the main purpose is to study the liquidity discount rate of restricted shares.The investors could reduce the liquidity risk of restricted stock through buying a European put call.This paper compared the existing pricing models: B-S formula,Longstaff model,Finnerty model and D model,and made adjustment of D model by calculated the alpha weight based on a lump sum offline institutional investors IPO data of ChiNext from 2009 to 2012.Besides,this paper verified the effect of restricted share ratio on liquidity discount by using the adjusted D model,and made a research and analysis on the performance of liquidity discount rate under different restriction period.The mains results contained: 1)The adjusted D model(based on a lump sum offline institutional investors IPO data of ChiNext):D=0.273×DL+0.727×DF,it describes the real discount rate for shorter time limit,and BS model with shorter limitation period is the closest to it.For this model,the discount rates went up with restricted time period,and it worked well when time period was short.2)This study verified the effects of restricted share ratio on the liquidity discount rates,that was,the higher the ratio,the higher the discount rate.This phenomenon was reflected in the overall A-share market,and was particularly evident in the ChiNext.3)The liquidity discount rate of restricted shares is directly proportional to the restricted period,and the models shows a diminishing marginal returns.This investigation complemented the literature of ChiNext and restricted stock,and filled in the gap of related pricing literature.Besides,this paper also had implications for industry work.It offered a valuation reference for stock pledging,asset transfer and liability transfer.