Diversification potential in real estate portfolios

Candelon, Bertrand;Fuerst, Franz;Hasse, Jean-Baptiste
(2021) International Economics — Vol. 166, p. 126-139 (2021)

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In this paper, we study the international and sectoral diversification potential in real estate portfolios. Building on a unique dataset of direct real estate markets covering 16 OECD countries over the period 1999–2018, we introduce a statistical test to compare country-level and sectorlevel diversification potential. This new diversification test provides investors and analysts with a valuable tool as it delivers both estimates and robust significance levels. The empirical findings for real estate investments broadly reveal that international diversification dominates sectoral diversification.
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Candelon, B., Fuerst, F., & Hasse, J.-B. (2021). Diversification potential in real estate portfolios. International Economics, 166, 126-139. https://doi.org/10.1016/j.inteco.2021.04.001 (Original work published 2021)