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Real Estate in the Mixed-asset Portfolio: The Question of Consistency

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Author Info

  • Stephen Lee

    (Department of Real Estate & Planning, University of Reading)

  • Simon Stevenson

    (University College Dublin and Cass Business School, City University)

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    Abstract

    The recent poor performance of the equity market in the UK has meant that real estate is increasingly been seen as an attractive addition to the mixed-asset portfolio. However, determining whether the good return enjoyed by real estate is a temporary or long-term phenomenon is a question that remains largely unanswered. In other words, there is little or no evidence to indicate whether real estate should play a consistent role in the mixed-asset portfolio over short- and long-term investment horizons. Consistency in this context refers to the ability of an asset to maintain a positive allocation in an efficient portfolio over different holding periods. Such consistency is a desirable trait for any investment, but takes on particular significance when real estate is considered, as the asset class is generally perceived to be a long-term investment due to illiquidity. From an institutional investor’s perspective, it is therefore crucial to determine whether real estate can be reasonably expected to maintain a consistent allocation in the mixed-asset portfolio in both the short and long run and at what percentage. To address the question of consistency the allocation of real estate in the mixed-asset portfolio was calculated over different holding periods varying from 5- to 25-years.

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    File URL: http://www.reading.ac.uk/LM/LM/fulltxt/1004.pdf
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    Bibliographic Info

    Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2004-10.

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    Length: 14 pages
    Date of creation: 2004
    Date of revision:
    Handle: RePEc:rdg:repxwp:rep-wp2004-10

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    Related research

    Keywords: mixed-asset portfolios; consistency; marginal impact;

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