Portfolio Diversification Across U.S. Gateway and Non-Gateway Real Estate Markets

Martin Hoesli and Louis Johner

Journal of Real Estate Research, 2022, vol. 44, issue 4, 523-552

Abstract: Using simulation analysis and property-level data for the US, we compare performance metrics for portfolios containing varying proportions of gateway and non-gateway markets. Risk-adjusted performance is found to be similar across types of markets. Gateway markets have higher appreciation and total returns, while non-gateway markets exhibit higher income returns even after accounting for capital expenditures. Downside risk appears to be slightly greater for gateway markets than for non-gateway markets; however, full drawdown and recovery lengths tend to be shorter for gateway markets. Systematic risk is found to be constant across types of markets. We show that discriminating between gateway and non-gateway markets is useful for mixed-asset diversification purposes, with the former type of markets appearing in risky portfolios and the latter in low-risk portfolios. By considering a large spectrum of performance metrics in a realistic investment setting, the results should provide investors with valuable information when allocating funds across gateway and non-gateway markets. The article also provides insights regarding how best to define gateway markets.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/08965803.2022.2038902 (text/html)
Access to full text is restricted to subscribers.

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:taf:rjerxx:v:44:y:2022:i:4:p:523-552

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjer20

DOI: 10.1080/08965803.2022.2038902

Access Statistics for this article

Journal of Real Estate Research is currently edited by William Hardin and Michael Seiler

More articles in Journal of Real Estate Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().