Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70123
Authors: 
Chesney, Marc
Kempf, Alexander
Year of Publication: 
2011
Series/Report no.: 
CFR Working Paper 10-11 [rev.]
Abstract: 
This paper determines the value of asset tradeability in an option pricing framework. In our model, tradeability is valuable since it allows investors to exploit temporary mis-pricings of stocks. The model delivers several novel insights on the value of tradeability: The value of tradeability is the larger, the higher the pricing efficiency of the market is. Uncertainty increases the value of tradeablity, no matter whether the uncertainty results from noise trading or from new information about the fundamental value of the stock. The value of tradeability is the larger, the longer the illiquid stock cannot be traded and the more trading dates the liquid stock offers.
Subjects: 
tradeability
liquidity
option pricing
JEL: 
G13
Document Type: 
Working Paper

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