Utility Indi¤erence Discount of Restricted Stock Value1

Many stocks are subject to some kinds of resale restrictions in the \u85nancial markets.In this paper, we introduces the short sale constraints into a three asset consumption-portfolio choice model and propose the Utility Indi¤erence Discount (UID) to measure the discount of the restricted stocks. We consider di¤erent short sale constraints and study the their impact on the UID of restricted stock. The results could help us understand the economic sense of short sales constraints on the value of restricted stocks and help resolve the argument on the magnitude of discount due to resale restriction. JEL Classi\u85cation: G1