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Contents<br />
1. Introduction .......................................................................................1<br />
1.1 The significance of subject ............................................................................ 1<br />
1.2 Research methodology and main conclusions ............................................. 3<br />
1.3 The feature and innovations of paper ............................................................ 7<br />
1.4 Framework of paper ...................................................................................... 8<br />
2. Literature review ..................................................................................9<br />
2.1 Literature review 1:The influence of liquidity on portfolio selection and<br />
asset pricing ................................................................................................... 9<br />
2.1.1 From the point of view of Market Microstructure Theory ........................ 9<br />
2.1.2 From the point of view of dynamic asset pricing .................................. 12<br />
2.2 Literature review 2: The influence of illiquidity on portfolio selection<br />
and asset pricing .......................................................................................... 16<br />
2.2.1 Illiquid asset pricing in framework of one-period static analysis............ 17<br />
2.2.2 Illiquid asset pricing in framework of intertemporal dynamic<br />
programming .......................................................................................... 19<br />
2.2.3 Equilibrium asset pricing with time-varying illiquidity ........................ 22<br />
2.2.4 Value discount of illiquid asset................................................................ 24<br />
2·2·5 The influence of illiquidity on asset pricing by option- pricing theory 26<br />
2.3 Literature review 3: Research of asset pricing and the Reform of Equity<br />
Segmentation in China ................................................................................. 27<br />
3. The influence of marketability of illiquid asset on asset price――in<br />
framework of One-period Static Analysis ......................................32<br />
3.1 Models of liquid and Illiquid Asset Pricing-- under equity segmentation 33<br />
3.2 The influence of Marketability of illiquid asset on asset price in liquid<br />
market ............................................................................................................ 36<br />
3.3 Conclusion .................................................................................................... 40<br />
4. Illiquid asset pricing and Optimal Portfolio Choice―― in<br />
framework of Intertemporal Dynamic Programming ..................41<br />
4.1 Design model................................................................................................... 42