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Optimal Holding Period for a Real Estate Portfolio

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Author Info
Baroni, Michel () (ESSEC Business School)
Barthélémy, Fabrice () (THEMA, University of Cergy-Pontoise)
Mokrane, Mahdi () (IXIS-AEW Europe)

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Abstract

This 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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Publisher Info
Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 07008.

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Length: 25 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:ebg:essewp:dr-07008

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Related research
Keywords: Cash Flows Simulations Holding Period Real Estate Portfolio Management

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December. [Downloadable!] (restricted)
  2. Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2004. "Physical Real Estate: A Paris Repeat Sales Residential Index," ESSEC Working Papers DR 04007, ESSEC Research Center, ESSEC Business School. [Downloadable!]
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  3. Atkins, Allen B & Dyl, Edward A, 1997. " Transactions Costs and Holding Periods for Common Stocks," Journal of Finance, American Finance Association, vol. 52(1), pages 309-25, March. [Downloadable!] (restricted)
  4. Tinic, Seha M, 1972. "The Economics of Liquidity Services," The Quarterly Journal of Economics, MIT Press, vol. 86(1), pages 79-93, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fabrice Barthélémy & Jean-Luc Prigent, 2008. "Optimal Time to Sell in Real Estate Portfolio Management," THEMA Working Papers 2008-13, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
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