Keywords

comparable transaction pricing, syndicated loans, pricing mistakes

Abstract

Finance professionals commonly set prices based on the analysis of recently closed, comparable transactions. Using data on syndicated loans, we exploit the lag between loans’ closing dates and their inclusion in a widely used comparables database to identify the effect of past transactions on new transaction pricing. Comparables pricing is an important determinant of individual loan spreads, but a failure to account for overlap in information across loans leads to pricing mistakes. Comparables used repeatedly are overweighted as they develop redundant channels of influence on later transactions. Market conditions prevailing at the time a comparable was priced also unduly influence subsequent loans.

Original Publication Citation

Comparables Pricing, with Justin Murfin Review of Financial Studies, 2019, 32(2): 688-737.

Document Type

Peer-Reviewed Article

Publication Date

2018

Publisher

Review of Financial Studies

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Associate Professor

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