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Value weighting and real estate portfolio risk

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  • Edward J. Schuck
  • Gerald R. Brown

Abstract

This paper extends the discussion concerning the value weighting and variability of portfolio returns. In particular, it critically analyses the work of Morrell (1993) in light of previous research and the theory of portfolio strategy. It shows that his conclusions are only valid under restrictive conditions concerning asset variance and the pairwise correlation structure of returns that are typical of naive investment strategies. A revised formulation of Morrell's coefficient of value skewness (CVS) is derived which is more general in application, while caveats are place on its interpretation. The strategic implications of value weighting are then discussed in the light of this analysis, raising questions for further research.

Suggested Citation

  • Edward J. Schuck & Gerald R. Brown, 1997. "Value weighting and real estate portfolio risk," Journal of Property Research, Taylor & Francis Journals, vol. 14(3), pages 169-187, January.
    • Handle: RePEc:taf:jpropr:v:14:y:1997:i:3:p:169-187
    DOI: 10.1080/095999197368591
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    References listed on IDEAS

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    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    Cited by:

    1. Steven Devaney & Colin Lizieri, 2005. "Individual Assets, Market Structure and the Drivers of Returns," ERES eres2005_156, European Real Estate Society (ERES).
    2. Steven Devaney & Colin Lizieri, 2005. "Individual Assets, Market Structure and the Drivers of Return1," Journal of Property Research, Taylor & Francis Journals, vol. 22(4), pages 287-307, December.
    3. Peter Byrne & Stephen Lee, 2000. "Risk reduction in the United Kingdom property market," Journal of Property Research, Taylor & Francis Journals, vol. 17(1), pages 23-46, January.
    4. Peter J. Byrne & Stephen Lee, 2001. "Risk reduction and real estate portfolio size," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(7), pages 369-379.
    5. Brett Robinson, 2012. "How many leases are enough to diversify a portfolio of multi-let industrial properties?," ERES eres2012_351, European Real Estate Society (ERES).
    6. Lee, Chyi Lin & Stevenson, Simon & Cho, Hyunbum, 2022. "Listed real estate futures trading, market efficiency, and direct real estate linkages: International evidence," Journal of International Money and Finance, Elsevier, vol. 127(C).

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