The Application Of The Schwartz & Moon Model In The Valuation Of Real Estate Listed Companies

The valuation of real estate companies has been a controversial subject both in th e academic literature and financial press. The traditional business valuation methods are approach, market comparison approach and the income approach, these approach are applicable and scientific when assessing the general business. But it is difficult to use these approach to value the growing high-tech companies because of the unique value and risk characteristics of the growing high-tech companies, The development of the real option theory offers a new way for growing high-tech companies to value assessment. The biggest contribution of real options method is to measure the potential value of flexibility,and which has great significance to the growing high-tech companies with highly uncertainty.Since real estate industry have option like characteristics and asymmetric payoffs,this paper attempts to apply real option pricing model created by Schwartz and Moon(2000) to get the rational price of real estate companies and look for the key value-drivers.This paper focuses on valuing Vanke based on the financial report from the first quarter of the year 2012 to the thierd quarter of 2016. After estimating the model para meters and solving the model by Monte Carlo simulation , the model stock price for Vanke is worked out; moreover, market prices are getting close to the model price in the third quarter of 2016. Finally, I perform sensitivity analysis on the more critical p arameters of the model.