Real Estate Diversification Benefits

19 Pages Posted: 11 Jun 2018

Date Written: 1997

Abstract

Diversification benefits are shown to vary inversely with the correlation between asset returns. The present study estimates average correlation coefficients between real estate returns from property-specific data of an internationally diversified real estate fund in the Netherlands. It is found that diversification benefits within the United States are much larger than on the European Continent. The low correlation found between U.S. real estate returns implies that portfolios of small numbers of U.S. properties would require large return premia. Also, the study helps to explain why financial intermediaries exist in the real estate industry and when investors should consider employing them.

Keywords: investment, portfoilio management, diversification, real estate

JEL Classification: G11

Suggested Citation

De Wit, Dirk P.M., Real Estate Diversification Benefits (1997). Journal of Real Estate Research, Vol. 14, No. 1/2, 1997, Available at SSRN: https://ssrn.com/abstract=3178111

Dirk P.M. De Wit (Contact Author)

University of Amsterdam ( email )

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