Duration and Risk

Gerald R. Brown ()
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Gerald R. Brown: National University of Singapore Singapore, 119260, http://www.nus.edu.sg/

Journal of Real Estate Research, 2000, vol. 20, issue 3, 337-356

Abstract: Duration has long been used as a means of managing the risk of bond portfolios. It has also been extended to the analysis of equities. Although it is often been compared with the half-life of an asset it is more correct to consider duration as the approximate percentage change in price for each one-percent change in yield. Given this view it will be seen that the volatility of an asset and its duration are closely related. This paper uses the duration of a conventional valuation model to estimate both the volatility and total risk of the each sector of the UK commercial property market relative to the property market as a whole. The approach has potential value in estimating the risk of a new property where historic time series information is either limited on not available. In addition, by drawing a distinction between ex-post and ex-ante measures of risk the paper also estimates the inflation flow through rate for different lease structures.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (3)

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