Non-normal real estate return distributions by property type in the U.K.

Young, M.S., Lee, S. L. and Devaney, S. P., (2005) Non-normal real estate return distributions by property type in the U.K. Working Papers in Real Estate & Planning. 30/05. Working Paper. University of Reading, Reading. pp28.

Abstract/Summary

Investment risk models with infinite variance provide a better description of distributions of individual property returns in the IPD database over the period 1981 to 2003 than Normally distributed risk models, which mirrors results in the U.S. and Australia using identical methodology. Real estate investment risk is heteroscedastic, but the Characteristic Exponent of the investment risk function is constant across time yet may vary by property type. Asset diversification is far less effective at reducing the impact of non-systematic investment risk on real estate portfolios than in the case of assets with Normally distributed investment risk. Multi-risk factor portfolio allocation models based on measures of investment codependence from finite-variance statistics are ineffectual in the real estate context.

Item Type	Report (Working Paper)
URI	https://reading-clone.eprints-hosting.org/id/eprint/21337
Divisions	Henley Business School > Real Estate and Planning
Uncontrolled Keywords	Asset-specific risk, return distributions, non-Normality, diversification, institutional investing
Publisher	University of Reading
Publisher Statement	The copyright of each working paper remains with the author. If you wish to quote from or cite any paper please contact the appropriate author; in some cases a more recent version of the paper may have been published elsewhere.
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