Risk and Real Estate Investment: An International Perspective

The literature regarding portfolio analysis for institutional real estate investors has until now largely been concerned with benefits associated with naïve diversification strategies. In this paper, we discuss the prospects that institutional characteristics suggest for risk reduction in internationally diversified portfolios. The risk/return relationship of each country is affected by its own unique institutional environment and therefore there are potential benefits for investors. We argue that, given the significant differences in the institutional framework across countries, there are likely impacts on returns and that this fact deserves the attention of institutional investors.