Optimal Holding Period for a Real Estate Portfolio
AbstractThis paper considers the use of simulated cash flows to determine the optimal holding period of a real estate portfolio to maximize its present value. The traditional DCF approach with an estimation of the resale value through a growth rate of the future cash flow does not let appear this optimum. However, if the terminal value is calculated from the trend of a diffusion process of the price, an optimum may appear under certain conditions. Finally we consider the sensitivity of the present value to the different parameters involved in the cash flow estimations.
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Bibliographic InfoPaper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 07008.
Length: 25 pages
Date of creation: Apr 2007
Date of revision:
Cash Flows Simulations; Holding Period; Real Estate Portfolio Management;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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