Residential Real Estate Return, Risk and Portfolio Building of Cities in China

Posted: 26 Feb 2020 Last revised: 9 Nov 2020

See all articles by Shizhen Wang

Shizhen Wang

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning; School of Government, Beijing Normal University

Jie Jiang

Beijing Normal University (BNU) - School of Economics and Business Administration

David J. Hartzell

University of North Carolina at Chapel Hill

Date Written: January 26, 2020

Abstract

In this paper, we build up a portfolio in the Chinese residential real estate market. We separate 35 big cities in China into 3 groups with different criteria. Then we build portfolios for these groups, by comparing the efficient frontier and Sharpe ratio with the portfolio of full samples. We find out the most suitable criteria to be the Real Housing Price Increase Rate.

Then we choose cities in the different groups together to find out the portfolio which has a high Sharpe Ratio with limited cities number.

This means the real estate company could invest in limited cities to get a similar portfolio performance with the full area. We test if this method in other parts of China, and the result shows this method could also work well. Our research has valuable meaning for both investors and policymakers.

Keywords: Residential real estate, Risk and return, Diversification, Real Estate Portfolio, Chinese Cities

JEL Classification: C32, C58, E43, G12, G15, R3

Suggested Citation

Wang, Shizhen and Jiang, Jie and Hartzell, David J., Residential Real Estate Return, Risk and Portfolio Building of Cities in China (January 26, 2020). Available at SSRN: https://ssrn.com/abstract=3521816 or http://dx.doi.org/10.2139/ssrn.3521816

Shizhen Wang (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning ( email )

New East Building
CB #3140
Chapel Hill, NC 27599
United States

School of Government, Beijing Normal University ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, 100875
China

Jie Jiang

Beijing Normal University (BNU) - School of Economics and Business Administration ( email )

No.19 Xinwai Str
Haidian District
Beijing, 100875
China

David J. Hartzell

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3160 (Phone)
919-962-0054 (Fax)

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