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Improving strategic decisions for real estate investors: Perspectives on allocation and management
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction 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 [en]
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: urn:nbn:se:kth:diva-207004ISBN: 978-91-85783-78-6 (print)OAI: oai:DiVA.org:kth-207004DiVA, id: diva2:1095022
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
List of papers
1. Public real estate- correlation and volatility dynamics in the U.K. mixed-asset portfolio
Open this publication in new window or tab >>Public real estate- correlation and volatility dynamics in the U.K. mixed-asset portfolio
(English)Manuscript (preprint) (Other academic)
Keywords
Public real estate, private real estate, equity, bonds, conditional volatilities, conditional correlations, liquidity
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-207000 (URN)
Note

QC 20170512

Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-05-12Bibliographically approved
2. Methods for comparing diversification strategies on the Swedish real estate market
Open this publication in new window or tab >>Methods for comparing diversification strategies on the Swedish real estate market
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.

Keywords
Risk reduction, property type, region, efficient frontiers, correlation
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-207003 (URN)
Note

QC 20170512

Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-05-12Bibliographically approved
3. The role of optimal regions in forming efficient real estate portfolios
Open this publication in new window or tab >>The role of optimal regions in forming efficient real estate portfolios
(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. 

Keywords
Real estate portfolio, diversification, economic regions, clusters
National Category
Economics
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-207001 (URN)
Note

QC 20170512

Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-05-12Bibliographically approved
4. Will outsourcing of commercial real estate management add to performance: A quantitative analysis of the Swedish real estate market
Open this publication in new window or tab >>Will outsourcing of commercial real estate management add to performance: A quantitative analysis of the Swedish real estate market
(English)Manuscript (preprint) (Other academic)
National Category
Business Administration
Research subject
Real Estate and Construction Management
Identifiers
urn:nbn:se:kth:diva-207002 (URN)
Note

QC 20170512

Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-05-12Bibliographically approved

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CiteExportLink to record
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Citation style
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