Strategic asset allocation and the demand for real estate: international evidence

Author First name, Last name, Institution

Zaghum Umar, Zayed University
Dennis Olson, Zayed University

ORCID Identifiers

0000-0001-5183-0184

Document Type

Article

Source of Publication

Empirical Economics

Publication Date

1-1-2021

Abstract

This paper analyzes the portfolio demand for real estate in a strategic asset allocation framework. We quantify the welfare losses from not including real estate in the traditional equity and bond portfolio for a typical investor. Previous studies have examined short-run and long-run optimal portfolio allocations for real estate in a North American setting. We employ forty-two real estate indices encompassing both developed and emerging economies, regions, and sectors. Our results show that in the short run, real estate is a desirable asset class for aggressive and conservative investors in all countries. At longer time horizons, real estate provides little diversification benefits in any of the eighteen sample countries. Thus, our study confirms North American results that real estate provides short run, but rather small long-run portfolio diversification benefits.

ISSN

0377-7332

Publisher

Springer Science and Business Media LLC

Disciplines

Business

Keywords

Dynamic asset allocation, Intertemporal hedging demand, Myopic demand, Optimal portfolio, Real estate investment

Scopus ID

85111369020

Indexed in Scopus

yes

Open Access

no

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