Strategic asset allocation and the demand for real estate: international evidence

Zaghum Umar and Dennis Olson

Empirical Economics, 2022, vol. 62, issue 5, No 14, 2513 pages

Abstract: Abstract This paper analyzes the portfolio demand for real estate in a strategic asset allocation framework. We quantify the welfare losses from not including real estate in the traditional equity and bond portfolio for a typical investor. Previous studies have examined short-run and long-run optimal portfolio allocations for real estate in a North American setting. We employ forty-two real estate indices encompassing both developed and emerging economies, regions, and sectors. Our results show that in the short run, real estate is a desirable asset class for aggressive and conservative investors in all countries. At longer time horizons, real estate provides little diversification benefits in any of the eighteen sample countries. Thus, our study confirms North American results that real estate provides short run, but rather small long-run portfolio diversification benefits.

Keywords: Dynamic asset allocation; Optimal portfolio; Real estate investment; Myopic demand; Intertemporal hedging demand (search for similar items in EconPapers)
JEL-codes: G11 G19 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s00181-021-02090-8

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