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Real estate and portfolio risk: an analysis based on copula functions


  • Matthieu Dulguerov


This article examines the risk‐return trade‐off of a mixed‐asset portfolio that includes real estate using copula functions. In particular, it analyses the role of direct as opposed to securitised real estate in terms of diversification when the dependence structure is modelled by an appropriate copula. The empirical analysis is conducted using Swiss data for the period 1987--2003. It is shown that a better portfolio diversification is obtained with indirect than with direct real estate. This finding has important practical consequences for asset allocation decisions.

Suggested Citation

  • Matthieu Dulguerov, 2009. "Real estate and portfolio risk: an analysis based on copula functions," Journal of Property Research, Taylor & Francis Journals, vol. 26(3), pages 265-280, September.
  • Handle: RePEc:taf:jpropr:v:26:y:2009:i:3:p:265-280
    DOI: 10.1080/09599911003669708

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    Cited by:

    1. Martin Hoesli & Kustrim Reka, 2013. "Volatility Spillovers, Comovements and Contagion in Securitized Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 47(1), pages 1-35, July.
    2. Louis Chakkalakal & Ulrich Hommel & Wenwei Li, 2018. "Transport infrastructure equities in mixed-asset portfolios: estimating risk with a Garch-Copula CVaR model," Journal of Property Research, Taylor & Francis Journals, vol. 35(2), pages 117-138, April.
    3. Andrey Pavlov & Eva Steiner & Susan Wachter, 2018. "The Consequences of REIT Index Membership for Return Patterns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 46(1), pages 210-250, March.
    4. Yang Deng & Helen X. H. Bao & Pu Gong, 2018. "Increased Tail Dependence in Global Public Real Estate Markets," International Real Estate Review, Asian Real Estate Society, vol. 21(2), pages 145-168.
    5. Eva Steiner & Jamie Alcock, 2011. "New Evidence on asymmetric dependence in the returns from U.S. Real Estate Estate Investment Trusts," ERES eres2011_161, European Real Estate Society (ERES).
    6. Jamie Alcock & Eva Steiner, 2018. "Fundamental Drivers of Dependence in REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 57(1), pages 4-42, July.

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