Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Real options premia implied from recent transactions in the Greek real estate market
AU - Tsekrekos, Andrianos
AU - Kanoutos, George
PY - 2013/7
Y1 - 2013/7
N2 - This research is the first to examine the empirical predictions of a real option-pricing model on market values from the realty market of a Euro area country, namely Greece. Using a manually collected sample of land and property transaction prices, we demonstrate that, a model which incorporates the option to wait to develop land has explanatory power on observed prices over and above the intrinsic value from a simple discounted cash flow (DCF) approach. Recent land transactions in our sample seem to reflect a premium for the option to wait (‘real option premium’) that can be as high as 26.66%–52.38%, especially in the west and north suburbs of Athens. Estimates of annual volatility for specific properties, as implied by transaction prices, are found to range from 15% to 21%.
AB - This research is the first to examine the empirical predictions of a real option-pricing model on market values from the realty market of a Euro area country, namely Greece. Using a manually collected sample of land and property transaction prices, we demonstrate that, a model which incorporates the option to wait to develop land has explanatory power on observed prices over and above the intrinsic value from a simple discounted cash flow (DCF) approach. Recent land transactions in our sample seem to reflect a premium for the option to wait (‘real option premium’) that can be as high as 26.66%–52.38%, especially in the west and north suburbs of Athens. Estimates of annual volatility for specific properties, as implied by transaction prices, are found to range from 15% to 21%.
KW - real options
KW - urban land values
KW - Greek real estate
KW - development
U2 - 10.1007/s11146-011-9350-z
DO - 10.1007/s11146-011-9350-z
M3 - Journal article
VL - 47
SP - 152
EP - 168
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
SN - 1573-045X
IS - 1
ER -