Title: A decision tree analysis to evaluate investments in bare dominium

Authors: Benedetto Manganelli

Addresses: School of Engineering, University of Basilicata, 10, Viale dell'Ateneo Lucano, 85100, Potenza, Italy

Abstract: This paper provides the logical basis and the algorithms of an evaluation model of investment concerning the purchase of the bare dominium of a residential property. The model is based on the decision tree analysis in order to address the fundamental and specific aspect of this type of investment. The decision tree analysis is one of the first attempts to introduce a strategic approach to the evaluation of investments within the traditional methods of capital budgeting. The attempt remains incomplete when the distribution of the probability of events that characterise the different scenarios is not exactly known. However, what seems to be a limitation of this type of analysis, in the present case, is not so. The knowledge and the implementation of the probability of survival or death depending on the age of the usufructuary, allows to manage the risk of the investment.

Keywords: bare dominium; real estate investment; decision tree analysis; DTA; risk management; residential properties; investment risk.

DOI: 10.1504/IJBIDM.2014.068365

International Journal of Business Intelligence and Data Mining, 2014 Vol.9 No.3, pp.195 - 209

Published online: 10 Apr 2015 *

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