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Optimal Holding Period In Real Estate Portfolio

Author

Listed:
  • Michel Baroni
  • Fabrice Barthélémy
  • Mahdi Mokrane

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.

Suggested Citation

  • Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2006. "Optimal Holding Period In Real Estate Portfolio," ERES eres2006_123, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2006_123
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    Cited by:

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    2. Charles‐Olivier Amédée‐Manesme & Fabrice Barthélémy & Michel Baroni & Etienne Dupuy, 2013. "Combining Monte Carlo simulations and options to manage the risk of real estate portfolios," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 31(4), pages 360-389, July.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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