The Return Due to Diversification of Real Estate to the U.S. Mixed-Asset Portfolio

Stephen Lee

Journal of Real Estate Portfolio Management, 2005, vol. 11, issue 1, 19-28

Abstract: Executive Summary. Booth and Fama (1992) observe that the compound return of a portfolio is greater than the weighted average of the compound returns of the individual investments, a difference referred to as the return due to diversification (RDD). Thus, assets that offer high RDD to a portfolio should be particularly attractive investments for long-term investors. This paper shows that U.S. direct real estate is just such an asset; however, the results are dependent on the percentage allocation to direct real estate and the asset class replaced.

Date: 2005
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DOI: 10.1080/10835547.2005.12089713

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