A look at real estate duration

Hartzell, David; Shulman, David; Langetieg, Terence C.; Leibowitz, Martin L.

doi:10.3905/jpm.1988.409176

Cited by 15 publications

(20 citation statements)

References 0 publications

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“…A similar equation was estimated for property and the results are summarised in The empirical estimates using the cross correlation between the discount and growth rates and the regression results are broadly in agreement with the findings of US studies based on regression which suggest a range of 2 -6 for the equity market and about 1 -4 for property (Leibowitz et al, 1989 andHartzell et al, 1988). It is also important to note that these estimates are much lower than those based on duration formulae that assume perfect independence between discount rates and dividends of shares or rents of property.…”

supporting

confidence: 71%

“…However, this observation appears to be at odds with a priori expectations since bond income is fixed whereas property income can vary with changes in expectations of inflation. Hartzell et al (1988) employed a cash flow valuation model to study the duration of US commercial real estate. They concluded that real estate investors have some control over the duration of the asset through the lease contracting process.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Its value is difficult to estimate. Following similar analyses, it can be proxied by the cross correlation between r and g [for example, Hartzell et al, (1988)], however the estimates will depend on how the leadlag structure is modelled. Alternatively, and arguable more technically correct, the relationship between g and r can be measured as the cross correlation between the change in r and change in g. Thus, the two versions of the inflation flow-through proxy are included in the duration calculations.…”

mentioning

confidence: 99%

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A comparison of UK equity and property duration

Hamelink¹,

Macgregor²,

Nanthakumaran³

et al. 2002

Journal of Property Research

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DedicationThis paper is dedicated to Nanda Nanthakumaran who died before it was published. He was, not only a dedicated teacher and researcher of international renown, but also a dear friend, sadly missed by everyone who knew him. We hope that the alterations we have made subsequent to his death are in keeping with the high standards he always set. A comparison of UK property and equity duration AbstractThis paper considers the duration of property and equity. A general formula for duration of asset classes is derived. It is shown that calculations which assume, usually implicitly, that the flow-through of inflation to cash flow is zero, produce misleadingly high durations for property and equities. These are typically in the range 15 to 25 years. Simulations using the formulae show that property has some bond-like characteristics. The results indicate that, for realistic flow-through rates, equities have a higher duration than property. The flow-through rate is the most important variable in the estimation of equities. Using historical data, equity duration is estimated at 8.65 years and property's at 3.15 years. These are substantially lower than those commonly cited. If these values can be substantiated, and if higher values are used in practice, portfolio immunisation strategies may need to be reconsidered.

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supporting

confidence: 71%

Section: Literature Reviewmentioning

confidence: 99%

mentioning

confidence: 99%

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A comparison of UK equity and property duration

Hamelink¹,

Macgregor²,

Nanthakumaran³

et al. 2002

Journal of Property Research

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“…Hartzell [24] begins with the premise that the rate of increase in real estate income is a function of the inflation rate modified by lease structure, real supply and demand conditions, and the degree of product enhancement or deterioration that occurs over time. In this form, real estate can be viewed as a bond whose principal is inflation-indexed and whose coupons range from zero to full indexation.…”

Section: Intdiff= (Frm Interest Rate) -(Arm Interest Rate)mentioning

confidence: 99%

“…Where: The Hartzall model [24]: To value a property in terms of investment. The model was selected given the availability of the required data in the public information system.…”

Section: Intdiff= (Frm Interest Rate) -(Arm Interest Rate)mentioning

confidence: 99%

A Business Intelligence System for Risk Management in the Real Estate Industry

Valverde¹

2011

IJCA

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The purpose of this work is to build a Business Intelligence System (BIS) for the real estate industry. The BIS be useful for risk managers interested in real estate investment. The paper identifies the main risk management related decisions that real estate professionals made on a daily basis. Risk management decision models are selected from an extensive literature review. These models are incorporated into an information system. A set of reports that will support risk management real estate decisions are designed and implemented in a prototype built to demonstrate the potential of this technology in the real estate industry. The database of the information system is populated with a sample of data collected from the real estate market of the state of California USA and results were generated to illustrate how reports can be used to support real estate risk management decisions.

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