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The role of optimal regions in forming efficient real estate portfolios
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

As a method for diversifying within a real estate portfolio, most studies find economic regions superior to geographic regions. Economic regions can either be created by grouping local real estate markets according to supplyor demand factors or by clustering real estate return variables. An alternative way of grouping local real estate markets is to identify optimal regions from a portfolio efficiency perspective using an allocation optimizer. The optimal regions created are the most efficient in their respective risk segments, butthe gains in risk/return ratio compared to geographic and economic groupings must be balanced against potential losses in management efficiency and the predictability of future returns. 

Keyword [en]
Real estate portfolio, diversification, economic regions, clusters
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
URN: urn:nbn:se:kth:diva-207001OAI: oai:DiVA.org:kth-207001DiVA: diva2:1095008
Note

QC 20170512

Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-05-12Bibliographically approved
In thesis
1. Improving strategic decisions for real estate investors: Perspectives on allocation and management
Open this publication in new window or tab >>Improving strategic decisions for real estate investors: Perspectives on allocation and management
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Real estate is an attractive asset class in the mixed-asset portfolio due to favorable risk return characteristics and low correlations with other asset classes like stock and bonds. Unlike financial assets, real estate is a physical asset where large lot sizes/indivisibility, heterogeneity, low liquidity and high transaction costs make applying financial models like modern portfolio theory (MPT) challenging. Optimal allocations to real estate found in literature are generally lower than actual allocations by investors and portfolio managers indicating there are aspects of the application of MPT to real estate that are not fully understood. Since management of real estate is costly and requires expert skills, the question on whether to outsource property management functions is of paramount interest for the real estate industry.

The aim of the thesis is to contribute to the literature on strategic decisions for real estate investors on allocation and management, Apart from reviewing literature relevant for strategic decisions at different levels and using a top-down approach to illustrate how selected allocation and management decisions are connected, four separate empirical studies are made to investigate the nature of selected strategic decisions for real estate investors.

Place, publisher, year, edition, pages
KTH Royal Institute of Technology, 2017. 34 p.
Keyword
Public real estate, private real estate, MPT, time-varying correlation, liquidity, mixed-asset portfolio, real estate portfolio, diversification, outsourcing
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-207004 (URN)978-91-85783-78-6 (ISBN)
Public defence
2017-06-09, L1, Drottning Kristinas väg 30, Stockholm, 13:00 (English)
Opponent
Supervisors
Note

QC 20170515

Available from: 2017-05-15 Created: 2017-05-11 Last updated: 2017-05-15Bibliographically approved

Open Access in DiVA

fulltext(374 kB)13 downloads
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CiteExportLink to record
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Citation style
  • apa
  • ieee
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  • Other style
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Language
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  • nn-NO
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  • Other locale
More languages
Output format
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