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Real Estate Portfolio Diversification by Sectors Using a RAL Approach

Ying Jenny Zhang et al.

Journal of Real Estate Portfolio Management2024https://doi.org/10.1080/10835547.2024.2313401article
ABDC B
Weight
0.30

What the paper says

We propose a cointegration-based method for evaluating the long-term independence of sectoral Real Estate Investment Trusts (REITs) within a portfolio. We employ this innovative approach to construct diversified portfolios. Our argument is that sectors contributing less to cointegration provide greater risk reduction benefits to the portfolio. To gauge the level of independence, we use the reciprocal of the aggregate likelihood ratio (RAL) statistics. Based on these statistics, we introduce a novel allocation strategy that assigns a higher weight to a sector with a larger RAL. Using CRSP/Ziman REIT sector data, we demonstrate that this new strategy outperforms traditional methods and the real estate market benchmark. Our paper introduces a fresh framework for REIT portfolio management and provides guidance on sector allocation.

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https://doi.org/https://doi.org/10.1080/10835547.2024.2313401

Or copy a formatted citation

@article{ying2024,
  title        = {{Real Estate Portfolio Diversification by Sectors Using a RAL Approach}},
  author       = {Ying Jenny Zhang et al.},
  journal      = {Journal of Real Estate Portfolio Management},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.1080/10835547.2024.2313401},
}

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Real Estate Portfolio Diversification by Sectors Using a RAL Approach

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Evidence weight

0.30

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.