Diversification Benefits of Japanese Real Estate Over the Last Four Decades

Posted: 18 May 2006

See all articles by Neal Maroney

Neal Maroney

University of New Orleans - College of Business Administration

Atsuyuki Naka

University of New Orleans - College of Business Administration - Department of Economics and Finance

Abstract

This paper studies the benefits of diversifying into real estate and other assets that typify the wealth held by Japanese investors. We examine movements in mean variance frontiers by employing spanning tests to assess the statistical significance of frontier shifts. We also investigate the impact of shifts in mean variance frontiers before and after the precipitous decline in Japanese real estate and stock market values that began in 1990. Spanning tests show that real estate, short and long-term bonds, and Japanese equity provide significant diversification benefits. We find that mean variance frontiers shift after 1990. Statistically significant shifts are also economically important as measured by Sharpe ratio changes. Although significant, the portfolio weights on Japanese real estate are relatively small compared to their composition found in surveys of Japanese household wealth.

Keywords: diversification benefits, Japanese real estate, direct real estate investment, spanning tests, mean variance frontiers

Suggested Citation

Maroney, Neal and Naka, Atsuyuki, Diversification Benefits of Japanese Real Estate Over the Last Four Decades. Journal of Real Estate Finance and Economics, Vol. 33, No. 3, 2006, Available at SSRN: https://ssrn.com/abstract=902883

Neal Maroney (Contact Author)

University of New Orleans - College of Business Administration ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Atsuyuki Naka

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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