 Risk reduction in the United Kingdom property marketPeter Byrne and Stephen Lee Journal of Property Research, 2000, vol. 17, issue 1, 23-46 Abstract: This paper investigates the potential benefits and limitations of equal and value-weighted diversification using as an example the UK institutional property market. To achieve this it uses the largest sample (392) of actual property returns that is currently available, over the period 1981 to 1996. To evaluate these issues two approaches are adopted; first, an analysis of the correlations within the sectors and regions and, second, simulations of property portfolios of increasing size constructed both naively and with value-weighting. Using these methods it is shown that the extent of possible risk reduction is limited because of the high positive correlations between assets in any portfolio, even when naively diversified. The results have implications for the development and maintenance of a property portfolio because they indicate that the achievable level of risk reduction depends upon the availability of assets, the weighting system used and the investor's risk tolerance. Date: 2000 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:jpropr:v:17:y:2000:i:1:p:23-46 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Property Research is currently edited by Bryan MacGregor More articles in Journal of Property Research from Taylor & Francis Journals |
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