Non-marketability and one-day selling lockup

We examine a unique one day lockup constraint in stock markets in China. 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 investors tend to purchase stocks when the lockup becomes less binding. We also find the non-marketability discount in the Huaxia 50 ETF market, with help from the newly introduced ETF options in China.