Annual Conference

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Real Estate and Urban Economics, Senior Fellows/Fellows

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May 2019

Private Equity Incentive Contracting and Fund Leverage Choice When Investors Only Care About Meeting Return Targets

Yongheng DENG, Teng LI, Timothy RIDDIOUGH
We show how the standard PE compensation contract is used to create incentives for GPs to utilize leverage so that LP investors can meet their return targets. A theory of fund capital structure is developed in which investors trade off alpha with costs of financial distress. We then show how carried...
Keywords: private equity, Investment, pension fund, carried interest
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Annual Conference

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Real Estate and Urban Economics

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May 2019

Multiple Tranches Information Asymmetry and the Impediments to Mortgage Renegotiation

Sanket KORGAONKAR
This paper examines how the creation of asset-backed security tranches disperses ownership of an asset–the pool of mortgages–subsequently impeding renegotiation of the underlying delinquent loans. I describe how multiplicity of tranches worsens the agency problem between a residential mortgage s...
Keywords: Securitization, Mortgage Servicing, Loan Modifications, financial crisis
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Annual Conference

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Real Estate and Urban Economics, Senior Fellows/Fellows

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May 2019

Information Asymmetries and Learning in Commercial Real Estate Markets

Sumit AGARWAL, Tien Foo SING, Wang LONG
This paper empirically tests information asymmetries and learning in global commercial real estate markets. We find that foreign investors pay a premium of 3.6%, on average, relative to local investors for comparable properties in local markets. The premiums reflect information disadvantages of fore...
Keywords: Learning, Information asymmetry, Foreign Investors, Commercial Real Estate Markets, Cross-border investments
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Annual Conference

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Real Estate and Urban Economics, Senior Fellows/Fellows

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May 2019

Gravity Counterparties and Foreign Investment

Cristian BADARINZA, Tarun RAMADORAI, Chihiro SHIMIZU
We propose a new explanation for the persistence of gravity in international investment flows based on new facts about large cross-border commercial real-estate transactions. Buyers in these transactions preferentially match with counterparties from own or proximate countries; such affinity-based ma...
Keywords: gravity, Foreign investment, Commercial real estate, Investment frictions, trust, Matching, Cross-border flows
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Surveying Business Uncertainty

Steven J. DAVIS, Nicholas A. BLOOM, David E. ALTIG, Jose Maria BARRERO
We develop a new monthly panel survey of business executives and a new question design that elicits subjective probability distributions over own-firm outcomes at a one-year look-ahead horizon. Our Survey of Business Uncertainty (SBU) began in 2014 and now covers 1,500 firms drawn from all 50 states...
Keywords: Business Uncertainty, Subjective Forecast Distributions, Surveys
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