Bridge over ocean
1 July 2008 Financial Analysts Journal Volume 64, Issue 4

Valuing Illiquid Common Stock

  1. Edward A. Dyl
  2. George J. Jiang

Illiquid common stock is worth less than stock that can be readily sold because the investor incurs an opportunity cost by being locked into the investment. Quantifying the amount of this illiquidity discount is an important issue in valuing certain common stock, especially for estate valuations. We examine whether a previously developed analytical model for valuing the lost “option to sell” when a stock is illiquid is a useful, practical tool for valuing illiquid common stock.

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