Real Estate Diversification: By Country or by Continent?

Posted: 13 Sep 1999

See all articles by Piet M. A. Eichholtz

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE)

Ronald Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group; TiasNimbas Business School

Peter C. Schotman

Maastricht University - Department of Finance

Date Written: August 1994

Abstract

This paper investigates whether a continental factor in real estate returns exists. To this end, a numeraire independent form of principal component analysis is used to see if real estate returns for countries within a continent move together. The methodology is applied on return indices of property shares for 12 countries from 3 continents. The findings indicate that real estate returns for countries within a continent indeed show common movements. This has two implications. The first is that investors cannot realize optimal international real estate diversification by investing in only one continent. To achieve that goal, a truly global scope is needed. The second implication is that international real estate investors can achieve near- optimal international diversification by investing in one country from each continent.

JEL Classification: F30

Suggested Citation

Eichholtz, Piet M. A. and Mahieu, Ronald J. and Schotman, Peter C., Real Estate Diversification: By Country or by Continent? (August 1994). Available at SSRN: https://ssrn.com/abstract=5649

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883648 (Phone)
+31 43 3258530 (Fax)

Ronald J. Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2430 (Phone)
+31 13 466 3280 (Fax)

HOME PAGE: http://center.uvt.nl/staff/mahieu/

TiasNimbas Business School ( email )

Warandelaan 2
Tilburg, North-Brabant 5071HS
Netherlands

Peter C. Schotman (Contact Author)

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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