TY  - JOUR
AU  - Kahl,Matthias
AU  - Liu,Jun
AU  - Longstaff,Francis A.
TI  - Paper millionaires: How valuable is stock to a stockholder who is restricted from selling it?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8969
PY  - 2002
Y2  - May 2002
UR  - http://www.nber.org/papers/w8969
L1  - http://www.nber.org/papers/w8969.pdf
N1  - Author contact info:
Matthias Kahl
Leeds School of Business
University of Colorado at Boulder
UCB 419
Boulder, CO 80309-0419
Tel: 303/4920141
E-Mail: matthias.kahl@colorado.edu

Jun Liu
Rady School of Management
UCSD
Pepper Canyon Hall Room 320
9500 Gilman Dr MC 0093
La Jolla CA 92093
Tel: 310/825-4083
E-Mail: junliu@ucsd.edu

Francis Longstaff
UCLA
Anderson Graduate School of Management
110 Westwood Plaza, Box 951481
Los Angeles, CA  90095-1481
Tel: 310/825-2218
Fax: 310/206-5455
E-Mail: francis.longstaff@anderson.ucla.edu
AB  - Many firms have stockholders who face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth. We study the costs of these liquidity restrictions on stockholders using a continuous-time portfolio choice framework. These restrictions have major effects on the optimal investment and consumption strategies because of the need to hedge the illiquid stock position and smooth consumption in anticipation of the eventual lapse of the restrictions. These results provide a number of important insights about the effects of illiquidity in financial markets.
ER  -