Marketing period risk in a portfolio context: Theory and empirical estimates from the UK commercial real estate market Article

Bond, SA, Hwang, S, Lin, Z et al. (2007). Marketing period risk in a portfolio context: Theory and empirical estimates from the UK commercial real estate market . JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS, 34(4), 447-461. 10.1007/s11146-007-9022-1

cited authors

  • Bond, SA; Hwang, S; Lin, Z; Vandell, KD

authors

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 (2004), and Lin and Vandell (2001, 2005), 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 around one 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 ten 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. © Springer Science+Business Media, LLC 2007.

publication date

  • May 1, 2007

published in

Digital Object Identifier (DOI)

start page

  • 447

end page

  • 461

volume

  • 34

issue

  • 4