8.4 Selection of Valuation Methods /Example 9
Answer to Question 1:
NAV becomes more subjective in a negative and less-liquid market…can anyone explain?
.can anyone explain?
“Note, however, that net asset value is an indication of a REIT’s assets to a buyer in the private market, which can be quite different from the value public market investors would attach to the REIT. For this reason, there have historically been significant differences (i.e., premiums or discounts) between NAV estimates and the prices at which REITs actually trade.”
Schweser pg 55, text 4
thanks
is scswer enuff for alt inv >
* The cap rate required for the NAVPS method is based on recent comparable transactions in the property market. (explained in 5.2 Net Asset Value Per Share: Calculation, Page 98 in the CFAI curriculum).
Thus, negative and illiquid market --> less transactons --> NAV becomes quite subjective. (5.3.1., Page 100)