Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Conceptual framework for real estate transactions

Conceptual framework for real estate transactions The purpose of this paper is the development for a conceptual framework with regard to the risk management of real estate positions as foundation for transaction decisions. In this context, the current market environment and legal obligations are the main drivers for market participants to improve their risk management practices. Based on this environment, a practical but science backed model is outlined.Design/methodology/approachThe paper uses a conceptual approach based on the existing literature to develop a practical decision support system. In addition, the current risk management best practices are outlined to illustrate the corporate and methodological foundation for the decision support system.FindingsThe conceptual model development reveals a clear necessity for the supplementation of price to value measures. Additional measures are derived from theoretic considerations based on Monte Carlo Simulation approaches to the risk management of property investments. These additional risk metrics support investors in order make risk-appropriate decisions.Practical implicationsThe resulting decision support system can be applied to the risk management of transaction decisions. Here, the model can be applied in any investment decision to support portfolio management considerations from a comprehensive risk management perspective. Investors can implement the system as part of their transaction procedure.Originality/valueThe existing body of literature mainly focuses on macroeconomic ratios in the context of decision support. In contrast, the present paper reveals a corporate decision support system, which is supposed to foster decisions of market agents especially with regard to potential price and value divergences and tightening legal obligations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

Conceptual framework for real estate transactions

Download PDF
18 pages

Loading next page...
 
/lp/emerald-publishing/conceptual-framework-for-real-estate-transactions-gqwRXcOOVY
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1463-578X
DOI
10.1108/jpif-01-2020-0014
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is the development for a conceptual framework with regard to the risk management of real estate positions as foundation for transaction decisions. In this context, the current market environment and legal obligations are the main drivers for market participants to improve their risk management practices. Based on this environment, a practical but science backed model is outlined.Design/methodology/approachThe paper uses a conceptual approach based on the existing literature to develop a practical decision support system. In addition, the current risk management best practices are outlined to illustrate the corporate and methodological foundation for the decision support system.FindingsThe conceptual model development reveals a clear necessity for the supplementation of price to value measures. Additional measures are derived from theoretic considerations based on Monte Carlo Simulation approaches to the risk management of property investments. These additional risk metrics support investors in order make risk-appropriate decisions.Practical implicationsThe resulting decision support system can be applied to the risk management of transaction decisions. Here, the model can be applied in any investment decision to support portfolio management considerations from a comprehensive risk management perspective. Investors can implement the system as part of their transaction procedure.Originality/valueThe existing body of literature mainly focuses on macroeconomic ratios in the context of decision support. In contrast, the present paper reveals a corporate decision support system, which is supposed to foster decisions of market agents especially with regard to potential price and value divergences and tightening legal obligations.

Journal

Journal of Property Investment & Finance – Emerald Publishing

Published: Jun 8, 2020

Keywords: Real estate risk management; Asset price bubble; Risk aggregation; Property valuation; Downside risk; Transaction decisions

References

  • Overoptimism and house price bubbles
    Abildgren, K.; Hansen, N.L.; Kuchler, A.
  • Ex-ante real estate Value at Risk calculation method
    Amédée-Manesme, C.-O.; Barthélémy, F.
  • What risk premium is ‘normal’?
    Arnott, R.D.; Bernstein, P.L.
  • UK fixed rate repayment mortgage and mortgage indemnity valuation
    Azevedo‐Pereira, J.A.; Newton, D.P.; Paxson, D.A.
  • Monte Carlo simulations versus DCF in real estate portfolio valuation
    Baroni, M.; Barthélémy, F.; Mokrane, M.
  • Preisblasen am deutschen Immobilienmarkt
    Benning-Linnert, M.
  • Bubbles, rational expectations and financial markets
    Blanchard, O.J.; Watson, M.W.
  • The dividend-price ratio and expectations of future dividends and discount factors
    Campbell, J.Y.; Shiller, R.J.
  • In search of distress risk
    Campbell, J.Y.; Hilscher, J.; Szilagyi, J.
  • Besonderheiten beim net asset value
    Creutzmann, A.
  • The capital asset pricing model (CAPM): the history of a failed revolutionary idea in finance?
    Dempsey, M.
  • Explosive rational bubbles in stock prices?
    Diba, B.T.; Grossman, H.I.
  • Valuing streams of risky cashflows with risk-value models
    Dorfleitner, G.; Gleißner, W.
  • The timeline estimation of bubbles: the case of real estate
    Fabozzi, F.J.; Xiao, K.
  • Credit supply and the price of housing
    Favara, G.; Imbs, J.
  • Is it ethical to teach that beta and CAPM explain something?
    Fernández, P.
  • The uncertainty of valuation
    French, N.; Gabrielli, L.
  • Risikotragfähigkeit, Risikotoleranz, Risikoappetit und Risikodeckungspotenzial
    Gleißner, W.; Wolfrum, M.
  • Risikoanalyse und Replikation für Unternehmensbewertung und wertorientierte Unternehmenssteuerung
    Gleißner, W.
  • Kapitalmarktorientierte Unternehmensbewertung: erkenntnisse der empirischen Kapitalmarktforschung und alternative Bewertungsmethoden
    Gleißner, W.
  • Value Investing: status quo und Perspektiven
    Gleißner, W.
  • Vermögensillusion: Preis-Wert-Verhältnis (P/W), Blasen und das unterschätzte Risiko von Kapitalanlagen im Niedrig-Zins-Umfeld
    Gleißner, W.
  • House Prices, Money, Credit and the Macroeconomy
    Goodhart, C.; Hofmann, B.
  • House price dynamics: fundamentals and expectations
    Granziera, E.; Kozicki, S.
  • Limits of arbitrage
    Gromb, D.; Vayanos, D.
  • An experimental evaluation of the effect of data presentation on heuristic bias in commercial valuation
    Havard, T.M.
  • Explaining asset mispricing using the resale option and inflation illusion
    Hayunga, D.K.; Lung, P.P.
  • Assessing high house prices: bubbles, fundamentals and misperceptions
    Himmelberg, C.; Mayer, C.; Sinai, T.
  • Monte Carlo simulations for real estate valuation
    Hoesli, M.; Jani, E.; Bender, A.
  • A stochastic programming model
    Kataoka, S.
  • Support vector machine and entropy based decision support system for property valuation
    Lam, K.C.; Yu, C.Y.; Lam, C.K.
  • Nonspeculative bubbles in experimental asset markets: lack of common knowledge of rationality vs. Actual irrationality
    Lei, V.; Noussair, C.N.; Plott, C.R.
  • Monetary, credit and (other) transmission processes: a monetaristic view
    Meltzer, A.H.
  • Bank lending, real estate bubbles, and Basel II
    Panagopoulos, Y.; Vlamis, P.
  • Development of spatial decision support systems for residential real estate
    Peterson, K.
  • Explosive behavior in the 1990s nasdaq: when did exuberance escalate asset values?
    Phillips, P.C.B.; Wu, Y.; Yu, J.
  • How to identify housing bubbles? A decision support model
    Pitros, C.; Arayici, Y.
  • Money illusion in consumer perception of housing transactions
    Raftery, J.; Runeson, G.
  • The capital asset pricing model: a critical literature review
    Rossi, M.
  • Safety first and the holding of assets
    Roy, A.
  • A decision support system for financial and social investment
    Serrano-Cinca, C.; Gutiérrez-Nieto, B.
  • From efficient markets theory to behavioral finance
    Shiller, R.J.
  • The limits of arbitrage
    Shleifer, A.; Vishny, R.W.
  • Symposium on bubbles
    Stiglitz, J.E.
  • Predicting uncertainty: the impact of risk measurement on value of real estate portfolios
    Szumilo, N.; Gantenbein, P.; Gleißner, W.; Wiegelmann, T.
  • Safety first and hedging
    Telser, L.
  • Bad Advice, herding and bubbles
    Thoma, M.
  • The influence of a decision support tool on real estate valuations
    Tidwell, O.A.; Gallimore, P.
  • Fundamentalrisiken und Aktienrenditen – auch hier gilt, mit weniger Risiko zu einer besseren Performance
    Walkshäusl, C.
  • Preisblasen in Immobilienmärkten
    Wölfle, M.; Löffler, F.
  • Are there rational bubbles in foreign exchange markets?evidence from an alternative test
    Wu, Y.
  • Detecting bubbles in Hong Kong residential property market
    Yiu, M.S.; Yu, J.; Jin, L.
  • Is there a real estate bubble in the US?
    Zhou, W.; Sornette, D.
  • The impact of lease structures on the optimal holding period for a commercial real estate portfolio
    Amédée-Manesme, C.-O.; Baroni, M.; Barthélémy, F.; Mokrane, M.
  • Cornish-Fisher expansion for commercial real estate value at risk
    Amédée-Manesme, C.-O.; Barthélémy, F.; Keenan, D.
  • Measuring house price bubbles
    Bourassa, S.C.; Hoesli, M.; Oikarinen, E.
  • Cost of capital and valuation with imperfect diversification and unsystematic risks
    Gleißner, W.; Wolfrum, M.
  • Insolvenzrisiko, Rating und Unternehmenswert
    Gleißner, W.
  • Die angemessene Informationsgrundlage bei Entscheidung
    Graumann, M.
  • Fundamentale Bewertungskennzahlen zur Prognose von Asset-Märkten
    Humpe, A.; Rauscher, M.
  • Quantifying market risk with value-at-risk or expected shortfall? Consequences for capital requirements and model risk
    Kellner, R.; Roesch, D.
  • The determinants of international commercial real estate investment
    Lieser, K.; Groh, A.
  • Financial characteristics of international real estate returns: evidence from the UK, US, and Germany
    Maurer, R.; Reiner, F.; Sebastian, S.P.
  • Money and housing: evidence for the euro area and the US
    Setzer, R.; Greiber, C.