International Diversification of Real Estate Assets - Is it Worth It? Evidence from the Literature
|Author(s):||Pat Wilson & Ralf Zurbruegg|
|Date of publication:||May 2003|
|Working paper number:||126|
This paper examines the literature to date on the benefits of diversifying property assets internationally. Currently, there is no consensus on how much benefit can be derived from diversifying property portfolios globally. This is contrary to other financial assets where there seems to be common ground supporting holding international assets. In the real estate literature, there are two contrasting opinions as to the level of integration global property markets have and the advantages there are from holding international property assets. Specifically, this paper shows there are mixed outcomes irrespective of whether direct or indirect property assets are being examined, and this often depends on what type of statistical procedures are being applied. This study also provides some insights into more recent developments in the literature that might explain some of the diverse opinions that have been formed, these primarily being the inter-temporal instability of correlation coefficients and the impact that structural breaks can have upon statistical analysis.
|Paper:||Download (Format: PDF, Size: 4.1 Mb)|
|Comments:||Published as: Wilson, P. J. and Zurbruegg, R., 2003, "International Diversification of Real Estate Assets - Is it Worth It? Evidence from the Literature", Journal of Real Estate Literature, 11(3), 257-278.|
Brenk, S., 2008, Immobilien in der Asset Allocation: Rendite-Risiko-Analyse, Korrelation zu anderen Assetklassen und Einbeziehung in portfoliotheoretische Ansätze.
Büch, C., 2009, Bewertung von Investitionen in der immobilienwirtschaftlichen Projektentwicklung anhand eines modularen Realoptionsmodells.
Case, B., Yang, Y., and Yildirim, Y., 2012, "Dynamic Correlations Among Asset Classes: REIT and Stock Returns", The Journal of Real Estate Finance and Economics, 44(3), 298-318.
Chang, G. and Chen, C., 2014, "Evidence of Contagion in Global REITs Investment", International Review of Economics and Finance, 31, 148-158.
Chuangdomrongsomsuk, M. A. and Lizieri, C., 2013, "Diversification Gains and Systematic Risk Exposure in International Public Real Estate Markets", Paper for the European Real Estate Society Conference.
Ellis, C., Wilson, P. J. and Zurbruegg, R., 2007, "Real Estate ‘Value’ Stocks and International Diversification", Journal of Property Research, 24(3), 265-287.
Ghyoot, V. G., 2006, "Diversification in Property Investment Performance Reporting in South Africa: Theory Versus Practice", Southern African Business Review, 10(2), 111-129.
Giannotti, C. and Mattarocci, G., 2008, "Risk Diversification in a Real Estate Portfolio: Evidence from Italian Market", Journal of European Real Estate Research, 1(3), 214-234
Halbert, L. and Rouanet, H., 2013, "Filtering Risk Away: Global Finance Capital, Transcalar Territorial Networks and the (Un)Making of City-Regions: An Analysis of Business Property Development in Bangalore, India", Regional Studies, forthcoming.
Hatemi-J, A. and Roca, E., 2011, "How Globally Contagious Was the Recent US Real Estate Market Crisis? Evidence Based on a New Contagion Test", Economic Modelling, 28(6), 2560-2565.
Hatemi-J, A., Roca, E. and Al-Shayeb, A., 2014, "How Integrated are Real Estate Markets with the World Market? Evidence from Case-Wise Bootstrap Analysis", Economic Modelling, 37, 137-142.
Hoesli, M. and Lekander, J., 2008, "Real Estate Portfolio Strategy and Product Innovation in Europe", Journal of Property Investment & Finance, 26(2), 162-176.
Holshouser, J. and Baek, H. Y., 2010, "US REIT Internationalization and Firm Value", Journal of International Business Research, 9(1), 1-13.
Krystalogianni, A. and Tsolacos, S., 2004, "Regime Switching in Yield Structures and Real Estate Investment", Journal of Property Research, 21(4), 279-299.
Lee, M., 2009, "Inflation-Hedging Properties of Equity REITs: Before and After the 1990s Structure Break", PRRES 15th Annual Conference.
Lee, S. L., 2008, "Is the UK Real Estate Market Converging with the Rest of Europe?", Journal of European Real Estate Research, 2(1), 18-32.
Lee, S. L., 2010, "Are the Returns of the Spanish Real Estate Market Converging with the Rest of Europe? ", Working Paper.
Meeusen, M. and Moens, I., 2011, Beleggen in vastgoed binnen de Europese Monetaire Unie, Masters Thesis, University of Antwerp.
Milunovich, G. and Truck, S., 2013, "Regional and Global Contagion in Real Estate Investment Trusts: The Case of the Financial Crisis of 2007-2009", Journal of Property Investment & Finance, 31(1), 53-77.
Newell, G., Wing, C. K., Kei, W. S. and Hiang, L. K., 2009, "The Significance and Performance of Property Securities Markets in the Asian IFCs", Journal of Property Research, 26(2), 125-148.
Oak, S. and Dalbor, M. C., 2009, "The Impact of International Acquisition Announcements on the Returns of U.S. Lodging Firms", The Journal of Hospitality Financial Management, 17(1), 19-32.
Oikarinen, E., 2010, "Foreign Ownership of Stocks and Long-run Interdependence Between National Housing and Stock Markets—Evidence from Finnish Data", The Journal of Real Estate Finance and Economics, 41(4), 486-509.
Su, J., Cheung, A. and Roca, E., 2012, "Are Securitised Real Estate Markets Efﬁcient? New International Evidence Based on an Improved Automatic Portmanteau Test", Economic Modelling, 29(3), 684-690.
Viezer, T. W., 2010, "The Application of Modern Portfolio Theory to Real Estate: A Brief Survey", In J. B. Guerard (ed) Handbook of Portfolio Construction: Contemporary Applications of Markowitz Techniques, Springer, 733-760.
Waegner, I., 2007, "4-Quadranten-Ansatz Mögliche Potentiale der Portfoliodiversifizierung für Schweizer Institutionelle Investoren", Masters Thesis.Wilson, P. J., Stevenson, S. and Zurbruegg, R., 2007, "Foreign Property Shocks and the Impact on Domestic Securitized Real Estate Markets: An Unobserved Components Approach", The Journal of Real Estate Finance and Economics, 34(3), 407-424.
Wilson, P. J., Stevenson, S. and Zurbruegg, R., 2007, "Measuring Spillover Effects Across Asian Property Stocks", Journal of Property Research, 24(2), 123-138.
Wilson, P. J. and Zurbruegg, R., 2004, "Contagion or Interdependence?: Evidence from Comovements in Asia-Pacific Securitised Real Estate Markets During the 1997 Crisis", Journal of Property Investment & Finance, 22(5), 401-413.
Yunus, N., 2007, "Diversification Benefits of Real Estate Assets and Equity Assets in a Regional and Global Perspective", PhD Thesis, University of Texas at Arlington.
Yunus, N. and Swanson, P. E., 2007, "Modelling Linkages between US and Asia‐Pacific Securitized Property Markets", Journal of Property Research, 24(2), 95-122.
Zhiwei, C., 2007, The Long-Run Relationships and Short-Term Linkages in International Securitized Real Estate Markets, Masters Thesis, National University of Singapore.