In the early years of the Commercial Mortgage-Backed Securities market, nearly all issues were backed by mortgages on a single property type. Beginning in the early 1990's, the composition of CMBS mortgage pools changed, and most mortgages on a variety of property types. This study examines the relationship between the diversification of the CMBS mortgage pool and yields on CMBS supported by the pool. Results indicate that yield spreads on AAA-rated CMBS backed by diversified pools are slightly lower than yield spreads on CMBS backed by undiversified pools. There is no evidence that yields on lower-rated CMBS are affected by pool diversification
