Moreover, geographical diversification, based on correlations between MSAs, yields portfolio benefits that are superior to the naive approaches that were tested. This study provides institutional real estate investors with an another technique for improving the performance of their real estate portfolios. This study attempts to ascertain the extent to which institutional real estate investors use sophisticated decisionmaking practices. It expands on earlier studies by surveying a wider cross-section of investors and by considering a more comprehensive decisionmaking process. Overall, it appears that the responding institutional real estate investors employ fairly sophisticated investment decisionmaking practices.
Strategic analysis is a regular practice for most respondents.
Almost all the respondents require a hazardous waste report, but less than half require a formal feasibility analysis or an independent appraisal. Return to the top of this web page Hedging REIT Returns Using the Futures Markets Pete H. Oppenheimer Modern portfolio theory demonstrates that investors minimize risk by diversifying their holdings over asset classes containing different return patterns. Past research in real estate has compared returns on direct ownership in real estate assets with equity instruments for their portfolio diversification benefits and inflation hedging characteristics. Also, the literature has examined REIT returns for their co-movement with inflation, common stock returns, and returns generated from direct ownership in real estate. Specialty mutual funds that invest in a single industry attempt to diversify risk by purchasing equity interests across a broad range of companies within the industry.