International Evidence on Real Estate as a Portfolio Diversifier

Topics:
Market Studies,
Real Estate Portfolio Management
Tags:
Business Operations,
Real Estate
Source:
California State University, Fullerton - College of Business and Economics

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Overview: This paper provides an international comparison of the benefits of including real estate assets, both domestic and international, in mixed-asset portfolios. Data from seven countries on three continents are considered for a common time period (1987-2001) to facilitate comparisons. Real estate is found to be an effective portfolio diversifier, and even more so when both domestic and international real estate assets are considered. The optimal allocation to real estate is in the 15 to 25% range, and remains remarkably stable when the level of the standard deviation of real estate is altered. The breakdown of the real estate allocation between domestic and non-domestic assets, however, is found to vary substantially across countries and depending on whether returns are hedged or not.

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Format: PDF | Size: 151KB | Date: Jul 2003 | Pages: 38

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