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Can investors improve their investment opportunity sets by adding a real estate investment trust (REIT) portfolio to benchmark portfolios sorted by firm size and book-to-market ratio? According to U.S. REIT performance data over 1980–2002, REITs after 1986 improve the mean-variance frontier set. Equity REITs appear to be non-redundant financial assets, which helps to enhance the completeness of the financial market. Mortgage REITs provide no diversification benefits in the sample period.
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Chen et al. (2005) studied this question.
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