Pricing Limited Partnerships in the Secondary Market
This study investigates the pattern of prices for multiple partnerships sold in the secondary market. In the model, the partnership buyer prefers to purchase the units sequentially since sellers have varying desires to sell. The benefit of a sequential purchase strategy is partially offset by rational sellers who demand higher prices in earlier sales since the possibility of future sales reduces the sellersâ€™ eagerness to sell in earlier rounds. If this strategic component is sufficiently large, a pattern of decreasing prices should be observed. Using a panel dataset comprised of 52,679 transactions from eighteen real estate limited partnerships, and after controlling for performance characteristics, the study finds that prices decrease over time, thus indicating a significant strategic component in this market.
Volume (Year): 23 (2002)
Issue (Month): 3 ()
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References listed on IDEAS
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- McAfee R. Preston & Vincent Daniel, 1993. "The Declining Price Anomaly," Journal of Economic Theory, Elsevier, vol. 60(1), pages 191-212, June.
- Robert J. Weber, 1981. "Multiple-Object Auctions," Discussion Papers 496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Brad M. Barber, 1996. "Forecasting the Discounts of Market Prices from Appraised Values for Real Estate Limited Partnerships," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(4), pages 471-491.
- Levin, Dan & Smith, James L, 1991. "Some Evidence on the Winner's Curse: Comment," American Economic Review, American Economic Association, vol. 81(1), pages 370-75, March.
- Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
- Thiel, Stuart E, 1988. "Some Evidence of the Winner's Curse," American Economic Review, American Economic Association, vol. 78(5), pages 884-95, December.
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