The Return Due to Diversification of Real Estate to the U.S. Mixed-Asset Portfolio

Lee, Stephen L.
January 2005
Journal of Real Estate Portfolio Management;Jan-Apr2005, Vol. 11 Issue 1, p19
Academic Journal
Booth and Fama (1992) observe that the compound return of a portfolio is greater than the weighted average of the compound returns of the individual investments, a difference referred to as the return due to diversification (RDD). Thus, assets that offer high RDD to a portfolio should be particularly attractive investments for long-term investors. This paper shows that U.S. direct real estate is just such an asset; however, the results are dependent on the percentage allocation to direct real estate and the asset class replaced.


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