Factors influencing the choice of property portfolio diversification evaluation techniques in Nigeria

A. Olaleye, B.T. Aluko and C.A. Ajayi

Journal of Property Investment & Finance, 2007, vol. 25, issue 1, 23-42

Abstract: Purpose - The purpose of this paper is to examine the factors that have influenced the use of implicit (naïve) techniques in property portfolio diversification evaluation in the Nigeria property market. This is necessitated by the need to look at the ways by which the property portfolio diversification evaluation practice in the market could be made to improve and adjust to ever changing global trends in this area. Design/methodology/approach - The authors of this paper administered questionnaires, backed up with interviews, on 28 institutional property investors and 128 real estate practitioners in three locations (commercial nerve centres) of the country, namely, Lagos, Abuja and Port‐Harcourt metropolitan areas. Data were analysed with the use of frequency distribution, mean and standard deviation measures, relative importance index and Pearson Chi‐Square test. Findings - The results of the study in this paper revealed, among others, that lack of time series data and the small size of many of the investors' portfolios in Nigeria encouraged the use of implicit analysis in their property portfolio evaluation techniques. The study also showed that investors and practitioners detest complex calculations and were using traditional evaluation techniques because they considered the methods as needing no pre‐requisite knowledge before they could be used. Practical implications - The study in the paper concluded that there is the need for a restructuring of the Nigerian real estate education and portfolio evaluation practice and the use of a micro‐real estate specific data derived from local market information to develop property performance indices towards building up functional real estate indices at the regional and national levels. Originality/value - This paper is a pioneering attempt at establishing the factors that influenced the use of implicit techniques in property portfolio diversification evaluation in emerging property markets like Nigeria.

Keywords: Diversification; Nigeria; Real estate (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:v:25:y:2007:i:1:p:23-42

DOI: 10.1108/14635780710720153

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