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Determinants of Cross-Sectional Variation in Discount Rates, Growth Rates, and Exit Cap Rates

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Author Info

  • Åke GUNNELIN

    ()
    (Stockholm Institute for Financial Research)

  • Patric H. HENDERSHOTT

    ()
    (University of Aberdeen)

  • Martin HOESLI

    ()
    (HEC-University of Geneva, FAME, and University of Aberdeen (School of Business))

  • Bo SÖDERBERG

    ()
    (Royal Institute of Technology, Stockholm)

Abstract

This study investigates the determinants of key input variables in valuers’ DCF models used for estimating market values for offices. Data from 599 valuations in 2000 from Stockholm, Gothenburg and Malmö are used to explain variation in discount rates, expected growth rates in net operating income and exit cap rates. Our ability to explain the relatively wide variation in appraisal assumptions with plausible co-variates generates confidence in the appraisal process. This has important implications because most value and returns indices of commercial real estate world-wide are appraisal-based.

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Bibliographic Info

Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp90.

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Date of creation: Sep 2003
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Handle: RePEc:fam:rpseri:rp90

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Keywords: Real Estate Appraisal; DCF; Discount Rates; Capitalization Rates;

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