Fair value in the professional valuation: concept and models

Nandy, Monomita; Lodh, Suman; Artemenkov, Andrey Igorevich

doi:10.1504/ijca.2018.098262

Cited by 3 publications

(1 citation statement)

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“…In Section 2 we review a mathematical formulation for the “transaction equilibrium”/“fair exchange” principle (as applied to values-in-exchange situations), which is now essentially encapsulated into the equitable value basis of valuation under the International Valuation Standards (IVS) 2017 edition (IVSC, 2017). The social and economic import of such transactional equilibrium principles is more extensively described elsewhere (see Galasuyk, 2018; Artemenkov, 2017; Artemenkov et al , 2018). Section 3 reviews the logic and mechanics of the discount rate analysis under the TAPA framework and provides rate of return/discount rate forecasting models for the multi-period analysis context.…”

Section: Introduction: Professional Valuation (Pv) In Search Of Its Unified Methodological Visionmentioning

confidence: 99%

The transactional asset pricing approach

Michaletz¹,

Artemenkov

2019

JPIF

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Purpose The purpose of this paper is to present a methodology based on the transactional asset pricing approach (TAPA) and to illustrate the application of TAPA within the context of professional property valuation. Design/methodology/approach The TAPA is a novel analytical valuation methodology recasting the traditional derivations of the income approach techniques, including DCF, from a transactional perspective based on the principle of inter-temporal transactional equity, instead of the conventional investor-specific view originating from I. Fisher (1907, 1930). Findings The authors present DCF analysis as a specific case of a more general TAPA approach to valuation under the income method. This also leads to novel analytical derivations of the Direct income capitalization, Gordon, Inwood, Hoskold and Ring models. Based on the TAPA framework, the authors also research the value-enhancing effects of benchmark market volatility on the subject property value and conclude that such effects can be statistically significant depending on the DCF analysis period. Research limitations/implications The research has a direct bearing on time-variable discount rate forecasting capabilities, as it uses a time-variant structure for the discount rates. Practical implications Using the US Case-Shiller and BLS rental indices as a valuation benchmark, the paper contains an example of applying the general TAPA framework to value a notional property under a TAPA’s DCF version. Such property valuations can be easily replicated in practice – especially in the context of equitable/fair value determination under the International Valuation Standards Council valuation standards. Social implications TAPA is a deductive principles-based theory of asset valuation especially fit for the transactional and illiquid asset valuation contexts – thus enabling a more efficient pricing for such assets in a sense of reflecting the transactional interests of the parties more closely than achievable under the conventional valuation methods. Originality/value TAPA is an original filiation of research with roots going as far back as Aristotelian Catallactics. It contains analytical formalizations of certain transactional equity principles.

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Section: Introduction: Professional Valuation (Pv) In Search Of Its Unified Methodological Visionmentioning

confidence: 99%