Eres : Digital Library : Works

Paper eres2004_231:
Diversification Benefits from European Direct Real Estate Investment with a Special Focus on the German Market

id eres2004_231
authors Wellner, Kristin; Thomas, Matthias
year 2004
title Diversification Benefits from European Direct Real Estate Investment with a Special Focus on the German Market
source 11th European Real Estate Society Conference (2-5 June 2004) Milano, Italy
summary Besides the specific return and risk variables of individual assets within a portfolio the correlation of returns between the individual assets are of relevance for the portfolio risk. Capital market theory suggests that diversification effects develop from return correlations with a correlation coefficient of lower than 1. Through the separation of systematic and unsystematic risk in a portfolio the combination of two assets with returns not completely positive correlated results in a risk reduction. Systematic risk represents the market risk, which affects equally all assets on all markets considered. Consequently, it can not be diversified away by spreading risk. Unsystematic risk, however, affects only specific assets, asset classes or homogenous sub-markets. It is related to the individual assets and with that the risk of the total portfolio may be balanced by a spreading different assets and their returns correlating as negative as possible. As shown in the graph below it decreases with an increasing number of assets in a portfolio.
series ERES:conference
type normal paper
email wellner@htwm.de
content file.pdf (460,081 bytes)
discussion No discussions. Post discussion ...
ratings
session European Real Estate
last changed 2011/08/31 16:27
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