Restricted Stock Studies and Discounts for Lack of Marketability

This article analyzes arguments advanced against the use of restricted stock studies for the purpose of estimating discounts for lack of marketability. Those arguments amount to the claim that the discounts observed in restricted stock transactions reflect independent discounts for lack of marketability and risk. I argue that these discounts are in fact interrelated, such that removing liquidity restraints would eliminate the component of the discount that is thought to be attributable to risk.