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The Effect on Investment Diversification of Real Estate by Asset-Specific Risk-Focused on the US Real Estate Market-

  • Korea Real Estate Review
  • 2015, 25(3), pp.79-95
  • Publisher : korea real estate research institute
  • Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate

Roh, Sangyoun 1

1국민연금연구원

Accredited

ABSTRACT

This paper describes the recent diversification plans and their backgrounds of real estate investment by global investors. It examines the presence of the portfolio effects from the diversification plans, and analyzes how the asset-specific risk of properties impact on investment diversification. The paper tries to apply and analyze the empirical models which combine CAPM and EGARCH-M model for its issues. It has four main findings. First, the investment diversification that invests in various real estate, may be useful to reduce the portfolio risk and increase the return rate of it. Second, the asset-specific risk premium is a time-variant and the level of the risk is discriminant by the asset type, its location and the characteristics of market district. Third, the portfolio effect could be reduced when the market condition is abnormal like the global financial emergency. Fourth, there are asymmetric impacts of risk on the return rate by the type of market information(shock). Finally, recent investment diversification by global investors may contribute to the quality improvement of their holding portfolio. There are the impacts of the asset-specific risk premium on its background.

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