|
|
|
|
||||
|
||||
Marketing Period Risk in a Portfolio Context: Theory and Empirical Estimates from the UK Commercial Real Estate MarketShaun A. BondUniversity of Cincinnati Soosung HwangSungkyunkwan University - Department of Economics Zhenguo LinCalifornia State University, Fullerton - Department of Finance Kerry D. VandellUniversity of California, Irvine - Paul Merage School of Business Journal of Real Estate Finance and Economics, Vol. 34, No. 4, 2007 Abstract: The role of selling (or marketing) period uncertainty in understanding risk associated with property investment is examined in this paper. Using an approach developed by Lin and Vandell [2001, 2005] and Lin [2004], combined with a statistical model of UK commercial property transactions, we show that the ex ante level of risk exposure for a commercial real estate investor is aroundone and a half times that obtained from historical statistics. The risk related to marketing time uncertainty can be reduced by constructing a portfolio. We find that at least 10 properties are necessary to reduce this risk, assuming independence between marketing period risk and price risk. These findings have important implications for mixed-asset portfolio allocation decisions.
Keywords: liquidity risk, commercial real estate, time on market, transaction process, UK JEL Classification: R33, G11, G32 Accepted Paper SeriesDate posted: January 11, 2007Suggested CitationContact Information
|
|
||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo2 in 0.500 seconds
