This paper finds that Chinese stocks rise in February instead of January. Further analysis shows that the February premium is attributed to the Chinese New Year. We propose an alternative explanation for this premium based on liquidity preference, i.e., investors prefer holding liquid assets before the holiday and illiquid assets after the holiday. We find a substantial decrease in monetary base and increase in market activity after the Chinese New Year. The empirical fact that the Chinese New Year effect is particularly strong for stocks with low institutional holdings also supports this hypothesis.

We examine a unique one day lockup constraint in stock markets in China and contribute to the understanding of impact of non-marketability on asset prices. Buyers of Chinese stocks are subject to a one day lockup and cannot sell their shares until the next day, but warrant traders are free of such restrictions. We demonstrate that the lockup creates a price discount relative to stock value implied by warrants. We show that the discount decreases throughout the trading day and that investors tend to purchase stocks when the lockup becomes less binding. The paper provides implications to value illiquid assets.

We investigate considerations (compensations) paid in on-going Division Reform, a process of releasing trading constraint, in China Stock Market, and link this event with existing literature of restricted asset by inferring implied illiquidity discount of restricted shares from consideration. We also propose a new measure of restriction capturing multiple dimensions of restriction finding it together with the scale of restriction well explain the ratio of considerations and the implied illiquidity discount. We also use theoretical models to justify the 20% implied illiquidity discount and find it is below the 48.67% upper bound suggested by Longstaff (1995) and it falls within the range between 12.18% and 23.82% suggested by Lonstaff (2001) concluding the considerations paid in Division Reform is adequate and relative wealth of two classes of shareholders remains after the trading constraint released.