Real Estate as Part of an Investment Portfolio in Australia

21 Pages Posted: 20 Jun 2010 Last revised: 26 Jul 2010

See all articles by Richard A. Heaney

Richard A. Heaney

University of Western Australia

David Higgins

affiliation not provided to SSRN

Amalia Di Iorio

La Trobe Business School

Date Written: June 20, 2010

Abstract

Real estate is an important investment asset class for Australian retail and wholesale funds yet there are considerable problems associated with choosing the optimal allocation of real estate in a portfolio. This asset class poses considerable problems for portfolio managers because of reliance on appraisals in valuing direct real estate investment and the equity like behaviour of listed Australian real estate investment trusts (A-REITs). The focus of this paper is the analysis of direct investment in commercial real estate, direct investment in residential real estate as well as indirect investment through the ASX 300 A-REIT index using quarterly returns over the period from the 3rd quarter 1986 to the 3rd quarter 2009. Analysis is conducted on the relations that exist between the three classes of real estate investment as well as between the share market returns and real estate investment. Diversification benefits can be achieved with investment in real estate investment, particularly direct investment in residential real estate.

Keywords: Property, Real Estate, Diversified Portfolio Performance, Smoothed Property Returns

JEL Classification: G11

Suggested Citation

Heaney, Richard A. and Higgins, David and Di Iorio, Amalia, Real Estate as Part of an Investment Portfolio in Australia (June 20, 2010). Australian Centre for Financial Studies - Finsia Banking and Finance Conference 2010, Available at SSRN: https://ssrn.com/abstract=1627602 or http://dx.doi.org/10.2139/ssrn.1627602

Richard A. Heaney (Contact Author)

University of Western Australia ( email )

Crawley
Perth, Western Australia 6009
Australia
0414700799 (Phone)

David Higgins

affiliation not provided to SSRN ( email )

Amalia Di Iorio

La Trobe Business School ( email )

Department of Economics and Finance
Victoria 3552, 3086
Australia

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