Valuing Wealth with Liquidity Restrictions

Rong Tang, Yuan Tian, Shou Chen and Ziran Zou

Emerging Markets Finance and Trade, 2025, vol. 61, issue 5, 1360-1375

Abstract: Liquidity restrictions are recognized as a potential tool to help individuals avoid overconsumption, but their overall welfare implications are ambiguous. This paper quantifies the implied value of illiquid assets and identifies the conditions under which the implied value of illiquid assets exceeds its nominal value even in the absence of an illiquidity premium. We find that the implied value increases with degrees of present bias and elasticity of inter-temporal substitution. We also show that only the consumption pattern of individuals with liquidity restrictions exhibits hump-shaped dynamics, which is consistent with the well-known life cycle hypothesis and the reality.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2024.2415329 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:61:y:2025:i:5:p:1360-1375

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2024.2415329

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().