European Business Schools Librarian's Group

ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

No DR 06002: Monte Carlo Simulations versus DCF in Real Estate Portfolio Valuation

Michel Baroni (), Fabrice Barthélémy () and Mahdi Mokrane ()
Additional contact information
Michel Baroni: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE CEDEX , FRANCE
Fabrice Barthélémy: THEMA, University of Cergy-Pontoise, Postal: 33, Bd du Port, 95011 CERGY-PONTOISE CEDEX , FRANCE
Mahdi Mokrane: IXIS-AEW Europe, Postal: 12/20 rue Ferdinand Braudel, 75013 Paris

Abstract: This paper considers the use of simulated cash flows to value assets in real estate investment. We motivate the use of Monte Carlo simulation methods for the measurement of complex cash generating assets such as real estate assets return distribution. Important simulation inputs, such as the physical real estate price volatility estimator, are provided by results on real estate indices for Paris derived in an article by Baroni, Barthélémy and Mokrane (2005). Based on a residential real estate portfolio example, simulated cash flows (i) provide more robust valuations than traditional DCF valuations, (ii) permit the user to estimate the portfolio’s price distribution for any time horizon, and (iii) permit easy Values-at-Risk (VaR) computations.

Keywords: DCF; Monte-Carlo Simulations; Real Estate Indices; Real Estate Valuations

JEL-codes: C15; G12

31 pages, February 2006

Full text files 

showDeclFileRes.do?declId=4629&key=__workpaper__ PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to Sophie Magnanou ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:ebg:essewp:dr-06002This page generated on 2024-10-19 15:41:33.