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- Publisher
- Wiley
- Copyright
- 1993 The American Finance Association
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- DOI
- 10.1111/j.1540-6261.1993.tb04730.x
- Publisher site
- See Article on Publisher Site
Abstract
ABSTRACT This research is the first to examine the empirical predictions of a real option‐pricing model using a large sample of market prices. We find empirical support for a model that incorporates the option to wait to develop land. The option model has explanatory power for predicting transactions prices over and above the intrinsic value. Market prices reflect a premium for the option to wait to invest that has a mean value of 6% in our sample. We also estimate implied standard deviations for individual commercial property prices ranging from 18 to 28% per year.
Journal
The Journal of Finance – Wiley
Published: Jun 1, 1993