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Methods for comparing diversification strategies on the Swedish real estate market
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2016 (English)In: International Journal of Strategic Property Management, ISSN 1648-715X, E-ISSN 1648-9179, International, Vol. 20, no 1, p. 17-30Article in journal (Refereed) Published
Abstract [en]

This paper compares the effectiveness of different property portfolio diversification strategies using five methods; (1) correlation matrices, (2) efficient frontiers, (3) Sharpe ratios, using three different sub methods, (4) coefficients in equations explaining total returns and (5) R-square values in equations explaining total returns. The evaluation methods are applied to both value weighted and equally weighted indices based on Swedish real estate return data. All methods show that, if any, diversifying over property types is a better strategy on the Swedish market than diversifying over regions. No test yields significant support for regional diversification. The support for the property type strategy is stronger when using equally weighted indices.

Place, publisher, year, edition, pages
2016. Vol. 20, no 1, p. 17-30
Keywords [en]
Risk reduction, property type, region, efficient frontiers, correlation
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
URN: urn:nbn:se:kth:diva-207003OAI: oai:DiVA.org:kth-207003DiVA, id: diva2:1095013
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. p. 34
Keywords
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

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CiteExportLink to record
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Citation style
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Output format
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