Does Investor Size Matter? Evidence from Commercial Real Estate Transactions

45 Pages Posted: 24 Oct 2019 Last revised: 9 Feb 2021

See all articles by Dragana Cvijanovic

Dragana Cvijanovic

Cornell SC Johnson College of Business; Warwick Business School, University of Warwick

Stanimira Milcheva

University College London

Alex Van de Minne

University of Connecticut - Department of Finance

Date Written: October 15, 2019

Abstract

Employing an efficient Bayesian estimation procedure, Integrated Nested Laplace Approximation (INLA), we find evidence of Investor Size Premium. Controlling for investor skill, financing constraints, and prior market knowledge, as well as property and time-varying location specific factors and property random effects, we find that larger buyers tend to pay a significant price
premium relative to smaller buyers, for the otherwise identical property. Debt plays a role for the length of the holding period. These results point to a significant role of intrinsic valuations and the role of bargaining intensity and can explain why real estate markets are highly segmented.

Keywords: Investor size; Bayesian estimation, price and holding period, market segmentation, bargaining intensity.

JEL Classification: C11, G10

Suggested Citation

Cvijanovic, Dragana and Milcheva, Stanimira and Van de Minne, Alex, Does Investor Size Matter? Evidence from Commercial Real Estate Transactions (October 15, 2019). Available at SSRN: https://ssrn.com/abstract=3470384 or http://dx.doi.org/10.2139/ssrn.3470384

Dragana Cvijanovic (Contact Author)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Warwick Business School, University of Warwick ( email )

Coventry CV4 7AL
United Kingdom

Stanimira Milcheva

University College London ( email )

1-19 Torrington Place
Department of Construction and Project Management
London, London WC1E 7HB
United Kingdom

Alex Van de Minne

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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