The Transactional Assets Pricing Approach and Income Capitalization Models in Professional Valuation: Towards a “Quick” Income Capitalization Format

Michaletz, Vladimir B.; Artemenkov, Andrey Igorevich

doi:10.2478/remav-2018-0008

Cited by 9 publications

(14 citation statements)

References 11 publications

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“…The paper reviews the transactional asset pricing approach (TAPA) developed through the contribution of various authors over the past decade (Michaletz, 2005; Michaletz et al , 2007; Galasuyk, 2018; Andrews, 2011; Michaletz and Artemenkov, 2018) for the field of PV, and specifically addresses its property valuation context developing an example of property valuation under the TAPA’s Basic Pricing Equation (BPE).…”

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

confidence: 99%

“…Below follows an explanation of the TAPA approach as elaborated in Michaletz (2005), Michaletz et al (2007) and Michaletz and Artemenkov (2018).…”

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

confidence: 99%

“…the DIC/GIM, the Gordon growth model, Inwood and Ring), as well as allows proposing novel income capitalization formats (e.g. see Michaletz and Artemenkov, 2018).…”

Section: Tapa Discount Rate Theory (Single- and Multi-period Formulations)mentioning

confidence: 99%

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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%

“…Below follows an explanation of the TAPA approach as elaborated in Michaletz (2005), Michaletz et al (2007) and Michaletz and Artemenkov (2018).…”

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

confidence: 99%

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The transactional asset pricing approach

Michaletz¹,

Artemenkov

2019

JPIF

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“…Other authors, like Michaletz and Artemenkov (2018) recommend improvements in the transactional assets pricing approach (TAPA) within the valuation theory for valuing illiquidity assets as well. They have developed adjustments using Taylor series expansion and, by using a simulation technique, outline the performance of this new income capitalization approach in relation to TAPA.…”

Section: Overview -Valuation Approaches and Types Of Valuementioning

confidence: 99%

Protected Collateral Value: An Approach to Valuation of Commercial Properties for Loan Guarantees

Florencio

Alencar

2020

Real Estate Management and Valuation

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The valuation of commercial properties for the guarantee of loans is extremely relevant for financial institutions, since it directly impacts the calculation of the loan to value ratio (LTV). However, despite the vast literature on the subject, the choice of methodological basis and the definition of the type of value to be employed are not pacified issues among researchers and practitioners. In this sense, the main objective of this paper is to present a methodological approach, as well as a suggestion of the type of value for the valuation of commercial properties bound collateral.The main methods and types of values related to the valuation of bound collateral commercial properties are presented below. Next, we propose a refinement of the income method, based on the concept of the value of the investment opportunity and under the principle of value at risk. Finally, we promote a case study with data from the Brazilian market to illustrate the application of the proposed approach.Based on the case study, it was evidenced that the valuation approach proposed in this paper, anchored in the potential of the income generation of the property, reduces the risk of exposure to banks’ credit.

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“…Indeed, fundamental proposals for formulating a more positivist-oriented (or, specifically in our context, a less "divisive") theory for estimating fair values are available. In particular, the Transactional asset pricing approach (TAPA), developed by V. Michaletz in a series of publications that appeared over the last decade (Michaletz (2005), Michaletz (2007), Michaletz & Artemenkov (2018)), deserves a wider recognition as an instrument for estimating the fair values of assets, as well as the market value of less liquid assets (Andrews (2011)).…”

Section: Positivist Theories For Estimating Equitable/fair Valuementioning

confidence: 99%