Diversification Benefits from Foreign Real Estate Investments

C. Mitchell Conover · Haven Swint Friday · G. Stacy Sirmans

108 citations0/0 files storedJournal of Real Estate Portfolio Management

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Financial Markets and Investment Strategies Housing Market and Economics Financial Risk and Volatility Modeling

Abstract

Executive Summary. Previous research has questioned the stability of international equity diversification. This study examines whether foreign real estate exists in a more segmented market and whether foreign real estate provides any diversification benefit beyond that obtainable from foreign stocks. Using data encompassing the stock market crash of 1987, foreign real estate was found to have a lower correlation with U.S. stocks than foreign stocks. This lower correlation is shown to be stable through time as foreign real estate has a lower correlation in nearly the entire time period. Foreign real estate was also found to have a significant weight in efficient international portfolios.

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1995Is the correlation in international equity returns constant: 1960–1990?1990Transmission of Volatility between Stock Markets 1989Transmission of Volatility Between Stock Markets 1974Why Not Diversify Internationally Rather Than Domestically?1990Equity Real Estate Investment Trusts and Real Estate Returns 1996Does International Diversification Work Better for Real Estate than for Stocks and Bonds?1982Historic Returns and Institutional Real Estate Portfolios 1998The Predictability of International Real Estate Markets, Exchange Rate Risks and Diversification Consequences

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