Real Estate in the Mixed-asset Portfolio: The Question of Consistency

Stephen Lee and Simon Stevenson
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Stephen Lee: Department of Real Estate & Planning, University of Reading

Real Estate & Planning Working Papers from Henley Business School, University of Reading

Abstract: The recent poor performance of the equity market in the UK has meant that real estate is increasingly been seen as an attractive addition to the mixed-asset portfolio. However, determining whether the good return enjoyed by real estate is a temporary or long-term phenomenon is a question that remains largely unanswered. In other words, there is little or no evidence to indicate whether real estate should play a consistent role in the mixed-asset portfolio over short- and long-term investment horizons. Consistency in this context refers to the ability of an asset to maintain a positive allocation in an efficient portfolio over different holding periods. Such consistency is a desirable trait for any investment, but takes on particular significance when real estate is considered, as the asset class is generally perceived to be a long-term investment due to illiquidity. From an institutional investor's perspective, it is therefore crucial to determine whether real estate can be reasonably expected to maintain a consistent allocation in the mixed-asset portfolio in both the short and long run and at what percentage. To address the question of consistency the allocation of real estate in the mixed-asset portfolio was calculated over different holding periods varying from 5- to 25-years.

Keywords: mixed-asset portfolios; consistency; marginal impact (search for similar items in EconPapers)
Pages: 14 pages
Date: 2004
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Working Paper: Real estate in the mixed-asset portfolio: the question of consistency (2004)
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