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Real Estate Diversification Benefits

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Diversification benefits are shown to vary inversely with the correlation between asset returns. The present study estimates average correlation coefficients between real-estate returns from property-specific data of an internationally diversified real estate and in the Netherlands. It is found that diversification benefits within the United States are much larger than on the European Continent. The low correlation found between U.S. real estate returns implies that portfolios of small numbers of U.S. properties would require large return premia. Also, the study helps to explain shy financial intermediaries exist in the real estate industry and when investors should consider employing them.

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  • Dirk P.M. De Wit, 1997. "Real Estate Diversification Benefits," Journal of Real Estate Research, American Real Estate Society, vol. 14(2), pages 117-136.
    • Handle: RePEc:jre:issued:v:14:n:2:1997:p:117-136
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    Cited by:

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    2. Natalya Delcoure & Ross Dickens, 2004. "REIT and REOC Systematic Risk Sensitivity," Journal of Real Estate Research, American Real Estate Society, vol. 26(3), pages 237-254.
    3. Kim Hiang Liow & Graeme Newell, 2012. "Investment Dynamics of the Greater China Securitized Real Estate Markets," Journal of Real Estate Research, American Real Estate Society, vol. 34(3), pages 399-428.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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