OPTIMAL HOLDING PERIOD IN REAL ESTATE PORTFOLIO

Michel Baroni (), Fabrice Barthélémy () and Mahdi Mokrane

ERES from European Real Estate Society (ERES)

Abstract: In this paper, simulated cash flows are used to value real estate assets. We generate the cash flows by Monte Carlo simulations both for the current and the terminal cash flows. Important simulation inputs, such as the physical real estate price volatility estimator, are provided by results on real estate indices for Paris derived in an article by Baroni, BarthÈlÈmy and Mokrane (2005). Based on a residential real estate portfolio example, valuation by simulated cash flows lets appear an optimal holding period. The paper discusses under which circumstances this optimum exists and shows empirically its sensitivity to various parameters that are present in the simulations.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2006-01-01
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Working Paper: Optimal holding period In Real Estate Portfolio (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2006_123

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