'PGDesign / Universidade Federal do Rio Grande do Sul'
Abstract
This paper examines the risk-return and diversification properties of real estate investments.
In the process, we perform a variance analyses over NPI, TBI and NAREIT United States real
estate indexes as well as some of the most common international investment benchmarks. The
study uses data from January 1990 to March 2006. We present an optimal portfolio that could
be used by financial managers and ordinary investors. Results disclose U.S. real estate with
greater return than other important investment benchmarks for the fifteen-year study period.
Additionally, real estate diversification benefits as constitute of a mix-portfolio are confirmed
for the three used indexes. Evidence shows that direct investment in real estate is less
sensitive to business cycles than is indirect investment through NAREIT and other similar
Indexes. Finally, an optimal allocation of 49.6% for real estate index investing in NAREIT is
identified
