INFLUENCE OF LONG-TERM SHARE PRICE GROWTH ON SHORT-TERM SHARE PRICES

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INTRODUCTION

Property investment, with specific reference to income-producing property, is an investment medium which is based on investment principles similar to those of other investment and asset classes. Valuation forms an integral part of property investment, both for decision-making and for reporting purposes. Property valuation forms part of the discipline of asset valuation in general and can therefore be viewed from the same perspective as any other financial asset. The theory surrounding asset valuation is based on the expected return of future income streams. In order to assess the expected return, the value that an investor would put on the return is based on two categories of techniques; relative and fundamental techniques. Property valuation is based on relative techniques; the expected performance is compared to similar investments, and it is assessed how the investment under consideration would compare to such an alternative investment. This fictitious transaction, similar to the comparable actual transactions, places a current value on the investment.

CLARIFICATION OF CONCEPTS

While section 1.1 gave an overall background to the essence of this study, this section explains concepts that have a bearing on the study. Market Value as by Hornby (1995:718): “The price at which [something] would be sold if offered publicly” Market value with specific reference to the real estate market is defined as: “The amount which a property would have realized if sold on the date of valuation in the open market between a willing buyer and a willing seller” (Zybrands, Nel and Le Roux, 2004:23).

OBJECTIVES

Property investment has become a very specialized science, with many variables that can influence the ultimate return. In order to understand property investment, it is necessary to understand the value of the investment medium. The property valuation profession is a fairly young profession, especially in South Africa, and there is still a lot to be added to the body of knowledge in this profession.

PLAN OF THE STUDY

This chapter has provided the orientation for the balance of the study. It provides the broad guidelines, culminating in the problem statement, research questions and hypothesis in order to provide a clear understanding of the broad objectives of the study. The research design and analysis will be described in chapter 2. The chapter shows the handling of data, including an introduction to the case study and the use of samples, with an explanation of the research techniques and the methods of validation. Chapter 3 contains the theoretical foundation of the study. It presents a critical review of related literature and the various theories that have a bearing on the problem. Chapters 4 and 5 contain the empirical study. Chapter 6 formalizes the Listed Real Estate Investment Valuation Model, with a validation of the practical application of the model. Chapter 7 will answer the research questions, formally accepting or rejecting the hypothesis, listing the findings, stating the shortcomings of the model and stating the requirements for further research.

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ABSTRACT
1. CHAPTER 1
1.1. INTRODUCTION
1.2. CLARIFICATION OF CONCEPTS
1.3. OBJECTIVES
1.4. LIMITATIONS
1.5. IMPORTANCE OF STUDY
1.6. PROBLEM STATEMENT
1.6.1 SETTING THE PROBLEM:
1.6.2 NULL HYPOTHESIS AND ALTERNATIVE HYPOTHESIS:
1.7. PLAN OF THE STUDY
2. CHAPTER 2
2.1. INTRODUCTION TO AND STRUCTURE OF THE RESEARCH
2.2. SELECTION OF THE RESEARCH POPULATION
2.3. DATA COLLECTION STRATEGIES
2.4. TREATMENT OF DATA
3. CHAPTER 3
3.1. INTRODUCTION
3.2. RELATED LITERATURE
3.3. FINANCIAL VALUATION MODELS
3.4. PROPERTY VALUATION MODELS
3.5. CORPORATE VALUATION
3.5.1 DISCOUNTED CASH FLOW TECHNIQUES:
3.5.2 RELATIVE VALUATION TECHNIQUES:
3.6. DISCOUNTED NET ASSET VALUE
3.7. PORTFOLIO THEORY
3.8. CAPITAL-ASSET PRICING MODEL
3.9. ARBITRAGE PRICING THEORY
3.10. MONTE CARLO SIMULATION
3.11. INTEGRATION OF THEORY
3.12. VALUATION OF JSE LISTED COMPANIES
3.12.1 CRITICISM OF ACCOUNTING METHODS
3.12.2 ECONOMIC METHODS OF VALUATION
3.12.3 INFLUENCE OF DIVIDENDS ON SHARE PRICE
3.12.4 INFLUENCE OF LONG-TERM SHARE PRICE GROWTH ON SHORT-TERM SHARE PRICES
3.12.5 INFLUENCE OF DEBT ON SHARE PRICES
3.12.6 INFLUENCE OF NEW SHARE ISSUES ON SHARE PRICES
3.13. SUMMARY
4. CHAPTER 4
4.1. INTRODUCTION
4.2. LISTED FUND ENVIRONMENT
4.3. VALUATION OF LISTED FUNDS
4.3.1 Accounting methods of valuation
4.3.1.1 Common size statements
4.3.1.2 Internal liquidity (solvency)
4.3.1.3 Operating performance
4.3.1.4 Risk analysis
4.3.2 Comments on accounting ratios as driver of share price
4.4. CORRELATION OF SHARE PRICE TO FINANCIAL STATEMENTS:
4.5. USE OF AI IN INVESTIGATION OF LISTED FUNDS
4.6. MULTIPLE REGRESSION OF IDENTIFIED DATA
4.7. CORRELATION OF SHARE PRICE WITH THE JSE
4.8. CORRELATION OF SHARE PRICE WITH ECONOMY
4.9. CONCLUSION
5. CHAPTER 5
5.1. INTRODUCTION
5.2. CHANGES IN THE SIZE AND COMPOSITION OF THE PORTFOLIO
5.3. CHANGES IN THE PROPERTY VARIABLES OF THE PORTFOLIO
5.4. FROM PORTFOLIO TO INDIVIDUAL PROPERTY
5.5. REGRESSION OF THE PROPERTY PORTFOLIO
5.6. CONCLUSION
6. CHAPTER 6
6.1. INTRODUCTION
6.2. LISTED REAL ESTATE INVESTMENT VALUATION MODEL FORMALIZED
6.3. LISTED REAL-ESTATE INVESTMENT VALUATION MODEL TESTED
6.3.1 Growthpoint acquisition of 50% interest in V&A Waterfront
6.3.2 Hyprop acquisition of Attfund portfolio:
6.3.3 Listing of the Investec Properties portfolio:
6.4. CONCLUSION
7. CHAPTER 7
7.1. ANSWERING THE RESEARCH QUESTIONS
7.2. ACCEPTING THE HYPOTHESIS
7.3. OTHER FINDINGS
7.4. SHORTCOMINGS OF THE LREIV MODEL
7.5. RECOMMENDATIONS FOR FURTHER RESEARCH
7.6. PRACTICAL APPLICATION
REFERENCES
ANNEXURES