Does International Diversification Work Better for Real Estate than for Stocks and Bonds?

Date
31-01-1996
Publication
Published in Financial Analysts Journal
Expertise
Demographics, Investments

International diversification is now an established fact for stock and bond portfolios. For real estate shares, however, this acceptance has so far not been the case. This study is an investigation of the effectiveness of international real estate diversification relative to international diversification of stock and bond portfolios. Tests of international correlation matrixes of real estate returns, common stock returns, and bond returns indicate significantly lower correlations between national real estate returns than between common stock or bond returns. The implication is that international diversification reduces the risk of a real estate portfolio more than that of common stock and bond portfolios.

Publication

Eichholtz_International-Diversification.pdf

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