Risk Diversification in a Real Estate Portfolio: Evidence from the Italian Market
||Giannotti, Claudio; Gianluca Mattarocci
||Risk Diversification in a Real Estate Portfolio: Evidence from the Italian Market
||14th Annual European Real Estate Society Conference in London, UK
||Real estate investment is different from financial investment and such difference can affect the results of traditional mean -variance models. The literature on property finance summarises the differences of expected return and expected risk among individual real estate investments into four risk profiles: tenant, endogenous, exogenous and financial risks. The aim of this paper is to examine how the differences reported in the literature can affect the composition of a real estate portfolio based on Markowitz optimisation standards. The results stemming from the use of a real estate database supplied by Fimit SGR showed that an ex-ante study of risk profiles can help to identify those investment opportunities which are more or less near to the efficient frontier, although there is no prevailing criterion to identify a portfolio able to maximise investment diversification benefits.
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||Session F4: Issues in Real Estate Investment II
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