Optimal Liquidation of Venture Capital Stakes

Robert Dubil
Additional contact information
Robert Dubil: San Jose State University

Journal of Entrepreneurial Finance, 2002, vol. 7, issue 2, 65-82

Abstract: We model the optimal liquidation behavior of a venture capital or non-diversified asset management firm faced with a sale of concentrated security holdings. As the firm?s stake is large, its sales can lead to permanent and temporary price depressions. At the optimum, the institution chooses the liquidation interval to balance the exposure to the market return variance against the impact of its own sales on the realized return. We obtain closed-form solutions for power impact functions uncorrelated with returns. We also consider market impact correlated with the return process, i.e. a case where liquidity evaporates during severe price dislocations.

Keywords: Venture Capital; Exit; Liquidity (search for similar items in EconPapers)
JEL-codes: G32 M13 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://jefsite.org/RePEc/pep/journl/jef-2002-07-2-f-dubil.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pep:journl:v:7:y:2002:i:2:p:65-82

Access Statistics for this article

More articles in Journal of Entrepreneurial Finance from Pepperdine University, Graziadio School of Business and Management Contact information at EDIRC.
Bibliographic data for series maintained by Craig Everett ().