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Institutional Perspectives on Real Estate Investing: The Role of Risk and Uncertainty

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  • Ravi Dhar
  • William Goetzmann

Abstract

In this paper we address the factors influencing the institutional decision to allocate resources to real estate. We survey a sample of major institutional investors via a web questionnaire. They were willing to answer questions about their target real estate allocation, their plans to increase or decrease their allocation, the major reasons for investing in real estate, and views on the major risks and relative expense of doing so. We find that the endowments in our sample typically had a relatively short history of real estate investment, but planned to increase their allocation to the asset class - more so than pension funds. We also find uncertainty about use of historical data to be a significant factor in the allocation choice.

Suggested Citation

  • Ravi Dhar & William Goetzmann, 2005. "Institutional Perspectives on Real Estate Investing: The Role of Risk and Uncertainty," Yale School of Management Working Papers ysm457, Yale School of Management, revised 01 Jul 2005.
    • Handle: RePEc:ysm:somwrk:ysm457
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    File URL: http://icfpub.som.yale.edu/publications/2440
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    References listed on IDEAS

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    8. Johan Walden, 2004. "Real Investments under Knightian Uncertainty," Yale School of Management Working Papers amz2496, Yale School of Management, revised 01 Apr 2004.
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    Cited by:

    1. Uppal, Raman & Vilkov, Grigory & Buss, Adrian, 2015. "Where Experience Matters: Asset Allocation and Asset Pricing with Opaque and Illiquid Assets," CEPR Discussion Papers 10437, C.E.P.R. Discussion Papers.
    2. Dirk Brounen & Piet Eichholtz & David Ling, 2009. "The Liquidity of Property Shares: An International Comparison," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(3), pages 413-445, September.
    3. Jim Clayton & Greg MacKinnon & Liang Peng, 2008. "Time Variation of Liquidity in the Private Real Estate Market: An Empirical Investigation," Journal of Real Estate Research, American Real Estate Society, vol. 30(2), pages 125-160.
    4. Carsten Lausberg & Stephen Lee & Moritz Müller & Cay Oertel & Tobias Schultheiß, 2020. "Risk measures for direct real estate investments with non-normal or unknown return distributions," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 6(1), pages 3-27, April.
    5. Zouheir Mighri & Raouf Jaziri, 2023. "Long-Memory, Asymmetry and Fat-Tailed GARCH Models in Value-at-Risk Estimation: Empirical Evidence from the Global Real Estate Markets," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(1), pages 41-97, March.
    6. Buss, Adrian & Vilkov, Grigory & Uppal, Raman, 2018. "The Implications of Financial Innovation for Capital Markets and Household Welfare," CEPR Discussion Papers 13137, C.E.P.R. Discussion Papers.
    7. Uppal, Raman & Buss, Adrian & Vilkov, Grigory, 2017. "Financial Innovation and Asset Prices," CEPR Discussion Papers 12416, C.E.P.R. Discussion Papers.
    8. Matthew Cypher & S. McKay Price & Spenser Robinson & Michael J. Seiler, 2018. "Price Signals and Uncertainty in Commercial Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 246-263, August.
    9. Simon Stevenson & Alexey Akimov & Elaine Hutson & Alexandra Krystalogianni, 2014. "Concordance in Global Office Market Cycles," Regional Studies, Taylor & Francis Journals, vol. 48(3), pages 456-470, March.

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    Keywords

    Behavioral Finance; real estate; investing; risk; uncertainty;
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