Development Value: A Real Options Approach Using Empirical Data

Posted: 10 Aug 2011

See all articles by Robert Grovenstein

Robert Grovenstein

University of Connecticut - Department of Finance

James B. Kau

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Henry J. Munneke

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Date Written: August 9, 2011

Abstract

This paper combines an empirical methodology and a theoretical options approach to determine the real option values of development and delay for vacant parcels of land in the City of Chicago. A theoretical options model provides an option price that incorporates future uncertainty. The data allow for disaggregation down to specific land use categories and results show option values vary across zoning categories and within zoning categories for specific land uses.

Keywords: Real options, Land value, Development

Suggested Citation

Grovenstein, Robert and Kau, James B. and Munneke, Henry J., Development Value: A Real Options Approach Using Empirical Data (August 9, 2011). Journal of Real Estate Finance and Economics, Vol. 43, No. 3, 2011, Available at SSRN: https://ssrn.com/abstract=1907354

Robert Grovenstein

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

James B. Kau

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-9110 (Phone)
706-542-4295 (Fax)

Henry J. Munneke (Contact Author)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
(706) 542-0496 (Phone)
(706) 542-4295 (Fax)

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