The Role of Housing in a Mixed-Asset Portfolio: The Particular Case of Direct Housing Within the Greater Paris Area

Yasmine Essafi Zouari, Aya Nasreddine and Arnaud Simon
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Yasmine Essafi Zouari: ESPI2R - Laboratoire ESPI2R Research in Real Estate [Paris] - ESPI - Ecole Supérieure des Professions Immobilières
Aya Nasreddine: CEROS - Centre d'Etudes et de Recherches sur les Organisations et la Stratégie - UPN - Université Paris Nanterre
Arnaud Simon: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: his article explores the role of physical residential real estate within the optimal multi-asset portfolio. Specifically, we consider direct housing within the Grand Paris metropolis between 1996 and 2017 as an asset class together with financial assets. Our findings bring several contributions to the residential market literature. First, directly held housing investment brings diversification benefits to the mixed-asset portfolio. Second, using hierarchical clustering technique, we divide the Greater Paris area into five homogenous groups of communes and compute the optimal weight of each commune as well as each group of communes in the tangency portfolio. Third, we check the weights' stability through time and confirm that residential real estate always catches the highest weight in the optimal portfolio. Finally, we run additional tests to compare listed real estate performances in a mixed asset portfolio with those obtained by considering physical residential real estate. We conclude that listed real estate is not a substitute for direct housing.

Keywords: Direct housing; “Grand Paris” metropolis; inflation hedge; diversification; optimal portfolio (search for similar items in EconPapers)
Date: 2022-07-03
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Published in Journal of Housing Research, 2022, 31 (2), pp.196-219. ⟨10.1080/10527001.2022.2026030⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04010367

DOI: 10.1080/10527001.2022.2026030

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