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International Evidence on Real Estate as a Portfolio Diversifier
Aberdeen Property Invest. Nordic Reg, Sweden.ORCID iD: 0000-0002-1205-2129
2004 (English)In: Journal of Real Estate Research, ISSN 0896-5803, Vol. 26, no 2, 161-206 p.Article in journal (Refereed) Published
Abstract [en]

This paper provides an international comparison of the benefits of including real estate assets in mixed-asset portfolios. Real estate returns are desmoothed using a variant of the Geltner (1993) approach, and Bayes-Stein estimators are used to increase the stability of portfolio weight estimations. Both unhedged and hedged analyses are conducted. 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 15% to 25%, and remains stable when the level of the standard deviation of real estate is altered. Real estate allocation between domestic and non-domestic assets, however, varies substantially across countries, depending on whether returns are hedged or not.

Place, publisher, year, edition, pages
American Real Estate Society , 2004. Vol. 26, no 2, 161-206 p.
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-196018ScopusID: 2-s2.0-3543045061OAI: oai:DiVA.org:kth-196018DiVA: diva2:1045629
Note

QC 20161115

Available from: 2016-11-10 Created: 2016-11-10 Last updated: 2016-11-15Bibliographically approved
In thesis
1. Institutional Real Investments: Real Estate in a Multi-Asset Portfolio
Open this publication in new window or tab >>Institutional Real Investments: Real Estate in a Multi-Asset Portfolio
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The purpose of this thesis is to analyze real estate investments from the vantage point of an institutional multi asset investor perspective, both in terms of the potential benefits real estate can bring as well as the challenges it can pose. The thesis consists of six papers and approaches the research question from three distinct perspectives.

The quantitative papers consists of paper 1 and 5. Paper 1 analyses the portfolio characteristics of domestic and international real estate in a mean variance framework over seven investor domiciles. It is found that the optimal allocation to real estate is in the range of 15-25 percent depending on domicile of the investor. The fifth paper expands the analysis in paper one by expanding the data. Furthermore, the analysis is extended to investigate how the structure of the real estate portfolio can support a diversification objectives best.

Papers 2, 3 and 4 are the market related papers. Paper 2 compares the suggested allocation weights with the allocation to real estate of institutions in four countries, and finds that the actual allocation is significantly lower and that all investor domiciles have a significant home bias. The third paper discusses changes in the institutional framework of real estate markets and the size of the investment universe. Paper 4 discusses various entry points to the real estate market, and how an investor can utilize these in order to adjust the characteristics of the real estate portfolio.

The sixth and last paper is qualitative, and investigates how institutions managing pension capital handle real estate. ​

Place, publisher, year, edition, pages
KTH Royal Institute of Technology, 2016. 37 p.
Series
TRITA-FOB-DT, 2016:5
Keyword
Real Estate Investment, Asset Allocation, Alternative Assets, Multi-Asset Portfolio
National Category
Economics and Business
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-196536 (URN)978-91-85783-71-7 (ISBN)
Public defence
2016-12-09, Kollegiesalen, Brinellvägen 8, Stockholm, 13:00 (English)
Opponent
Supervisors
Note

QC 20161115

Available from: 2016-11-15 Created: 2016-11-15 Last updated: 2016-11-16Bibliographically approved

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