<p>Yes.  There is a good chapter on this general question in <em>The Valuation Handbook</em> book by Ashok Abbott.  It is a whole chapter so it is too long reproduce here.</p>

<p>Shortened down, he shows that there is a half-life effect given the amount of volume that a dealer normally carries and how long it normally takes them to liquidate a position.</p>

<p>ISBN-10: 0470385790</p>

CC BY-SA 4.0
2019-09-08T01:02:07.160Z
2019-09-08T01:02:07.160Z
Dave Harris
<p>When Forbes-lists of top billionaires are published we are usually aghast of their riches and statements such as "the 8 richest people own as much as the poorer half" are disseminated.</p>

<p>I was wondering however, most of these top billionaires have a huge concentration of their wealth in the form of stocks/securities. Is this kind of wealth then calculated as "number of stocks possessed x latest stock price"? That would entail a subtle commitment/choice because of the reason that when a large shareholder such as a billionaire sells of his stake in a short period time (to consume the proceeds) this sudden excess of supply in shares deflates the stock-price thus rendering the total proceeds lower than the value previously proposed.</p>

<p>Q: is there a simple way to answer the question how large the proceedings can optimally be if a large shareholder wishes to liquidate his shares in a time-interval <span class="math-container">$T&gt;0$</span> (assuming something like a rational-markets hypothesis applies to all other parties)? </p>

CC BY-SA 4.0
2019-09-07T22:13:37.353Z
This is a standard question in financial economics---"optimal liquidation"/"price impact"/etc, (There is also a literature on this in math finance, with a different perspective where economic content is absent.)
Michael
CC BY-SA 4.0
2019-09-07T22:16:40.410Z
Couple seminal papers: Almgren and Chriss 1999, and Kyle 1985. (There is also an accounting aspect to this question, the valuation of assets, but one would have to talk to an accountant about that.)
Michael
<microeconomics><supply-and-demand><liquidity>
Most profitable conversion of stock into money
5th decile
# Most profitable conversion of stock into money

(Asked by: username_0 on 2019-09-07)

When Forbes-lists of top billionaires are published we are usually aghast of their riches and statements such as "the 8 richest people own as much as the poorer half" are disseminated.

I was wondering however, most of these top billionaires have a huge concentration of their wealth in the form of stocks/securities. Is this kind of wealth then calculated as "number of stocks possessed x latest stock price"? That would entail a subtle commitment/choice because of the reason that when a large shareholder such as a billionaire sells of his stake in a short period time (to consume the proceeds) this sudden excess of supply in shares deflates the stock-price thus rendering the total proceeds lower than the value previously proposed.

Q: is there a simple way to answer the question how large the proceedings can optimally be if a large shareholder wishes to liquidate his shares in a time-interval $T>0$ (assuming something like a rational-markets hypothesis applies to all other parties)?

**Tags:** microeconomics, supply-and-demand, liquidity

> **Comments:**
> **username_1**: This is a standard question in financial economics---"optimal liquidation"/"price impact"/etc, (There is also a literature on this in math finance, with a different perspective where economic content is absent.)  
> **username_1**: Couple seminal papers: Almgren and Chriss 1999, and Kyle 1985. (There is also an accounting aspect to this question, the valuation of assets, but one would have to talk to an accountant about that.)  

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## 1 answers

### Answer by username_2 on 2019-09-08. Score: 1

Yes. There is a good chapter on this general question in *The Valuation Handbook* book by Ashok Abbott. It is a whole chapter so it is too long reproduce here.

Shortened down, he shows that there is a half-life effect given the amount of volume that a dealer normally carries and how long it normally takes them to liquidate a position.

ISBN-10: 0470385790


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