Inferring an Investment Return Series for Real Estate from Observations on Sales |
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| Authors: | James R. Follairi |
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| Affiliation: | School of Business Administration, University of California-Berkeley, Berkeley, California 94720 and Finance Department, Graduate School of Business, University of Texas at Austin, Austin, Texas 78712.;Graduate School of Public Policy, University of California-Berkeley, 2607 Hearst Avenue, Berkeley, California 94720. |
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| Abstract: | Accurate measurement of the returns to real estate investment are essential to sound analysis. This paper improves upon the traditionally employed method—collecting comparable sales data. A dynamic model of real estate appraisal is developed in which agents have incomplete information, heterogeneous search costs, and varying expectations. Various types of simulation analysis of the model indicate it performs best in the sense that the return estimate converges to the true value faster than other simpler rules. |
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