The transactional asset pricing approach

Vladimir Michaletz and Andrey I. Artemenkov

Journal of Property Investment & Finance, 2019, vol. 37, issue 3, 255-288

Abstract: Purpose - The purpose of this paper is to present a methodology based on the transactional asset pricing approach (TAPA) and to illustrate the application of TAPA within the context of professional property valuation. Design/methodology/approach - The TAPA is a novel analytical valuation methodology recasting the traditional derivations of the income approach techniques, including DCF, from a transactional perspective based on the principle of inter-temporal transactional equity, instead of the conventional investor-specific view originating from I.Fisher (1907, 1930). Findings - The authors present DCF analysis as a specific case of a more general TAPA approach to valuation under the income method. This also leads to novel analytical derivations of the Direct income capitalization, Gordon, Inwood, Hoskold and Ring models. Based on the TAPA framework, the authors also research the value-enhancing effects of benchmark market volatility on the subject property value and conclude that such effects can be statistically significant depending on the DCF analysis period. Research limitations/implications - The research has a direct bearing on time-variable discount rate forecasting capabilities, as it uses a time-variant structure for the discount rates. Practical implications - Using the US Case-Shiller and BLS rental indices as a valuation benchmark, the paper contains an example of applying the general TAPA framework to value a notional property under a TAPA’s DCF version. Such property valuations can be easily replicated in practice – especially in the context of equitable/fair value determination under the International Valuation Standards Council valuation standards. Social implications - TAPA is a deductive principles-based theory of asset valuation especially fit for the transactional and illiquid asset valuation contexts – thus enabling a more efficient pricing for such assets in a sense of reflecting the transactional interests of the parties more closely than achievable under the conventional valuation methods. Originality/value - TAPA is an original filiation of research with roots going as far back as Aristotelian Catallactics. It contains analytical formalizations of certain transactional equity principles.

Keywords: DCF analysis; Direct income capitalization; Gordon model; Property valuation methods; Time-variable discount rates; Transactional asset pricing approach; G12; D46 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:jpifpp:jpif-10-2018-0078

DOI: 10.1108/JPIF-10-2018-0078

Access Statistics for this article

Journal of Property Investment & Finance is currently edited by Nick French

More articles in Journal of Property Investment & Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().