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The Q theory of investment, the capital asset pricing model and the capitalization rate in real estate valuation

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  • John McDonald

Abstract

This article combines Tobin's Q theory of real investment with the Capital Asset Pricing Model (CAPM) to produce a model of the capitalization rate used in the valuation of real estate assets using the income approach. An empirical study of capitalization rates for office buildings in downtown Chicago is included.

Suggested Citation

  • John McDonald, 2010. "The Q theory of investment, the capital asset pricing model and the capitalization rate in real estate valuation," Applied Financial Economics, Taylor & Francis Journals, vol. 20(14), pages 1133-1143.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:14:p:1133-1143
    DOI: 10.1080/09603101003742523
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    1. Hendershott, Patric H & Shilling, James D, 1989. "The Impact of the Agencies on Conventional Fixed-Rate Mortgage Yields," The Journal of Real Estate Finance and Economics, Springer, vol. 2(2), pages 101-115, June.
    2. Hamada, Robert S, 1969. "Portfolio Analysis, Market Equilibrium and Corporation Finance," Journal of Finance, American Finance Association, vol. 24(1), pages 13-31, March.
    3. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    4. Rubinstein, Mark E, 1973. "A Mean-Variance Synthesis of Corporate Financial Theory," Journal of Finance, American Finance Association, vol. 28(1), pages 167-181, March.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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