Frontiers of Commercial Real Estate Portfolio Performance: Are Sector-Region Efficient Diversification Strategies a myth or reality?

Date

2017-12-08

Advisors

Journal Title

Journal ISSN

ISSN

0959-9916

Volume Title

Publisher

Taylor and Francis

Type

Article

Peer reviewed

Yes

Abstract

This paper departs from the traditional optimisation methods used to evaluate portfolio performance. Rather, the Stochastic Frontier Analysis approach is used to econometrically determine the benchmark real estate portfolio frontier and subsequently assess the gains from diversifying real estate portfolios along regional and sectoral dimensions in the UK. Portfolio specific inefficiency measures are obtained which indicate whether a portfolio is efficiently diversified and therefore places on the benchmark frontier and if not, the degree to which performance can be improved is quantified. Portfolio-specific efficiencies average at 85–91%, indicating scope to further improve performance. Further, diversification be it on a sectoral or regional dimension, contributes to significantly lower variability in portfolio efficiencies.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link

Keywords

diversification, portfolios, performance, real estate, sector and regional effects

Citation

Leone, V. and Ravishankar, G. (2017) Frontiers of commercial real estate portfolio performance: Are sector-region-efficient diversification strategies a myth or reality?. Journal of Property Research, 35 (2), pp. 95-116

Rights

Research Institute

Finance and Banking Research Group (FiBRe)