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Uncertainty and Foreign Real Estate Investment

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Abstract

Published research has offered little evidence in support of foreign real estate investment. Most of the literature suggests that foreign real estate yields investors in mixed-asset portfolios no tangible benefits in terms of diversification gains. However all these studies were done on the basis of point estimates where they solve for a single unique optimum portfolio composition. Thus, earlier research has left the impression that foreign real estate is ‘‘never’’ optimal. Here we use a bootstrap simulation to introduce uncertainty into the analysis. Our results suggest that although foreign real estate is not likely to provide investors with significant diversification benefits, substantial amounts of foreign real estate can potentially be optimal.

Suggested Citation

  • Ping Cheng & Alan J. Ziobrowski & Royce W. Caines & Brigette J. Ziobrowski, 1999. "Uncertainty and Foreign Real Estate Investment," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 463-480.
  • Handle: RePEc:jre:issued:v:18:n:3:1999:p:463-480
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    References listed on IDEAS

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    1. Youguo Liang & F.C. Neil Myer & James R. Webb, 1996. "The Bootstrap Efficient Frontier for Mixed-Asset Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(2), pages 247-256.
    2. Solnik, B H, 1974. "The International Pricing of Risk: An Empirical Investigation of the World Capital Market Structure," Journal of Finance, American Finance Association, vol. 29(2), pages 365-378, May.
    3. David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
    4. Alan J. Ziobrowski & Harry McAlum & Brigitte J. Ziobrowski, 1996. "Taxes and Foreign Real Estate Investment," Journal of Real Estate Research, American Real Estate Society, vol. 11(2), pages 197-213.
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    Cited by:

    1. Helen Higgs & Andrew C. Worthington, 2002. "The Prospects for Geographic Diversification in UK Regional Property Investment: Implications Derived from Multivariate Cointegration Analysis," School of Economics and Finance Discussion Papers and Working Papers Series 111, School of Economics and Finance, Queensland University of Technology.
    2. Haß, Lars Helge & Johanning, Lutz & Rudolph, Bernd & Schweizer, Denis, 2012. "Open-ended property funds: Risk and return profile — Diversification benefits and liquidity risks," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 90-107.
    3. Robert Johnson & Colin Lizieri & Luc Soenen & Elaine M. Worzala, 2005. "Hedging Private International Real Estate," Real Estate & Planning Working Papers rep-wp2005-01, Henley Business School, Reading University.

    More about this item

    JEL classification:

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

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