Overseas real estate investment has increased considerably in recent years. The assessment of risk for these investments, especially for real estate, has thus become very important. This study assesses the performance of real estate, stocks and bonds in the U.S., Canada, the United Kingdom, Australia, and New Zealand over the period 1985-93. The results indicate that the degree of appraisal-smoothing and intertemporal correlation in each of the five international real estate series is significant, resulting in the need to increase the real estate risk estimates by 34% to 47%. To account for currency risk over this nine-year period, currency-adjusted returns and risk were also estimated for investors from each of these five countries. All risk profiles increased significantly for international investors when adjusting for currency risk. However, additional portfolio diversification was achieved using real estate for international investors.
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