Abstract
Purpose This paper compares the benefits of direct international real estate investments in a mixed asset portfolio from the perspective of a passive investor with high and low bond allocation.Design/methodology/approach Due to high data availability and its professionalism, the Norwegian sovereign wealth fund was used as a representative example. Real estate indices from 8 countries were used for the portfolio analysis. The data were desmoothed according to Geltners’s 1993 approach.Findings The optimal real estate ratio in the present case is around 20–55%. However, this is strongly dependent on the bond ratio of the multi-asset portfolio. Portfolios with a high equity ratio benefit more from the additional direct real estate investments than portfolios with high bond ratios.Research limitations/implications A rebalancing of individual stocks and bonds was not analysed. Only indexes from MSCI (Morgan Stanley Capital International) were available.Practical implications Concludes that the weighting of stocks and bonds has a strong influence on the optimal real estate ratio and therefore structural changes that affect this weighting.Originality/value The originality of the paper lies in the analysis with different weights of stocks and bonds, the consideration of 8 real estate markets and the observation period. The results of the work highlight areas of interest for further research.
Subject
General Economics, Econometrics and Finance,Finance,General Business, Management and Accounting,General Economics, Econometrics and Finance,Finance,General Business, Management and Accounting
Reference30 articles.
1. Trading is hazardous to your wealth: the common stock investment performance of individual investors;Journal of Finance,2000
2. Real estate asset allocations and international real estate markets;Journal of the Asian Real Estate Society,1998
3. Modern portfolio theory and behavioral finance;The Journal of Wealth Management,2004
4. Real estate in mixed-asset portfolios for various investment horizons;The Journal of Portfolio Management,2019