The Liquidity Discount in the Italian Market

  •  Emanuel Bagna    


The illiquidity discount represents the reduction in the value of an asset because it cannot be easily sold. It is usually applied by appraisals in valuing a minority interest in a closely-held business. This article presents a literature review of the illiquidity discount and an analysis of the level of discount in Italy during the period 2003 - 2012. The analysis conducted made it possible to verify: a) the existence for the Italian market of a discount for lack of liquidity for shares with less turnover; b) the variability over time of that discount, thus agreeing with the literature that has found the premiums for liquidity risk vary over time. The discounts that were found are, nonetheless, smaller than those indicated in the literature. The descending trend over time for the discount would seem to be particularly consistent with the studies on restricted stocks.

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