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The Risk and Return Profile of Asian Real Estate Stocks

Author/s: Kim Hiang Liow, Mong Chuan Sim

Date Published: 1/01/2006

Published in: Volume 12 - 2006 Issue 3 (pages 283 - 310)

Abstract

This research examines the risk and return profile of Asian real estate stocks from an American investor’s point of view. Our results indicate that Asian real estate security markets have not produced high levels of compound returns relative to the US REIT and UK real estate stock markets since the 90’s. They have also experienced a higher level of volatility compared to their USA and UK counterparts. Asset allocations using meanvariance optimization are difficult to carry out, as many of the Asian property stock markets are not normally distributed. In addition, Asian real estate stocks have been able to provide diversification benefits in international investing that includes the US and UK security portfolios. However, the case for separate allocations to international real estate is weakened by the high correlations that are found in Asian markets between the real estate stock and broader market indexes.

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Keywords

Asian Real Estate Stocks - Diversification - Market Indexes - Normality - Return - Risk

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