Diversification Potential in Real Estate Portfolios

32 Pages Posted: 22 Apr 2021

See all articles by Bertrand Candelon

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Jean-Baptiste Hasse

Aix-Marseille University - Aix-Marseille School of Economics

Date Written: March 21, 2021

Abstract

In this paper, we study the international and sectoral diversification potential in real
estate portfolios. Building on a unique dataset of direct real estate markets covering 16 OECD
countries over the 1999-2018 period, we introduce a statistical test to compare country-level
and sector-level diversification potential. This new diversification test provides investors and
analysts with a valuable tool as it delivers both estimates and robust significance levels. The
empirical findings for real estate investments broadly reveal that international diversification
dominates sectoral diversification.

Keywords: Portfolio diversification, real estate markets

JEL Classification: F21, G11, R33

Suggested Citation

Candelon, Bertrand and Fuerst, Franz and Hasse, Jean-Baptiste, Diversification Potential in Real Estate Portfolios (March 21, 2021). Available at SSRN: https://ssrn.com/abstract=3831041 or http://dx.doi.org/10.2139/ssrn.3831041

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Jean-Baptiste Hasse

Aix-Marseille University - Aix-Marseille School of Economics ( email )

2 rue de la Charité
Marseille, 13236
France

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