Gains from Diversifying into Real Estate: Three Decades of Portfolio Returns Based on the Dynamic Investment Model
AbstractThis paper compares the investment policies and returns for portfolios of stocks and bonds with and without up to three categories of real estate. Both a domestic and a global setting are examined, with and without the possibility of leverage. The portfolios were generated via the dynamic investment model on the basis of the empirical probability assessment approach applied to past (joint) realizations of returns, both with and without correction for smoothing in the real estate data series. Our principal findings are: 1) the gains from adding real estate on a semi-passive (equal-weighted) basis to portfolios of either U.S. or global financial assets were relatively modest; in contrast, 2) the gains from adding real estate to the universe of U.S. financial assets under an active strategy were rather large (in some cases highly statistically significant), especially for the very risk-averse strategies; 3) the gains from adding (U.S.) real estate to a universe of global financial assets under an active strategy were mixed, although generally favorable for the highly risk- averse strategies; 4) correcting for second-moment smoothing in the real estate returns series had a relatively small impact for the more risk-tolerant strategies; and 5) there was some evidence that de-smoothing resulted in improved probability estimates.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by University of California at Berkeley in its series Research Program in Finance Working Papers with number RPF-239.
Date of creation: 01 Oct 1994
Date of revision:
Contact details of provider:
Postal: University of California at Berkeley, Berkeley, CA USA
Web page: http://haas.berkeley.edu/finance/WP/rpflist.html
More information through EDIRC
Postal: IBER, F502 Haas Building, University of California at Berkeley, Berkeley CA 94720-1922
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.