Duration and Risk
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.
Volume (Year): 20 (2000)
Issue (Month): 3 ()
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References listed on IDEAS
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- Lanstein, Ronald & Sharpe, William F., 1978. "Duration and Security Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(04), pages 653-668, November.
- Boquist, John A & Racette, George A & Schlarbaum, Gary G, 1975. "Duration and Risk Assessment for Bonds and Common Stocks," Journal of Finance, American Finance Association, vol. 30(5), pages 1360-65, December.
- Livingston, Miles, 1978. "Duration and Risk Assessment for Bonds and Common Stocks: A Note," Journal of Finance, American Finance Association, vol. 33(1), pages 293-95, March.
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