International Diversification in Frontier Real Estate Markets

Sulaiman T. Al-Abduljader ()
Additional contact information
Sulaiman T. Al-Abduljader: Gulf University for Science and Technology

International Real Estate Review, 2018, vol. 21, issue 1, 93-112

Abstract: The paper investigates the effects of international diversification in reducing risk. A test is applied on real estate returns by analyzing global portfolios that invest in the real estate of Gulf Cooperating Countries (GCC). The correlations between markets are not low enough to produce effective diversification. Nine out of the twelve portfolios have produced high enough correlations that when opposite positions (long and short) are taken, only then we begin to see significant reduction in risk. When comparing the effects of the real estate of the GCC with those of the real estate of Brazil, Russia, India and China (BRIC) in the context of a global equity portfolio, both the real estate of the GCC and BRIC do not produce diversification benefits when a long position is taken in developed markets. Nonetheless, when taking a long position in the real estate of the GCC, effective diversification is found when taking a short position in the developed markets. A similar case can also be concluded when taking a long position in the real estate of the BRIC countries and shorting the developed markets. The results suggest serious concerns on effective diversification among global investors with the current long only exposure to real estate in the region and suggests the introduction of shorting financial instruments for active hedging and portfolio optimization.

Keywords: Diversification; Real Estate; Emerging Markets; Asset Allocation; Capital Markets; Investment Management (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.gssinst.org/irer/wp-content/uploads/20 ... l-estate-markets.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ire:issued:v:21:n:01:2018:p:93-112

Ordering information: This journal article can be ordered from
Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850
https://www.gssinst.org/gssinst/index.html

Access Statistics for this article

International Real Estate Review is currently edited by Professor Sing Tien Foo and Professor Ko Wang

More articles in International Real Estate Review from Global Social Science Institute Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850.
Bibliographic data for series maintained by IRER Graduate Assistant/Webmaster ().