Beyond Risk-Adjusted Returns: Tail Risk and Portfolio Implications in Global REITs

This study compares the performance of major global REIT markets with REITs classified by their geographic operating market and returns measured in the corresponding local currency. The analysis evaluates risk-adjusted performance, dependence structures, downside risk, and portfolio implications using Sharpe, Sortino, Omega, VaR, CVaR, and three portfolio optimization techniques. Results show substantial variation in return distributions and downside risk across markets, while correlations generally increase during the COVID-19 pandemic and the subsequent period. Canadian and Euro-area REITs exhibit comparatively strong risk-adjusted performance, although their tail-risk profiles differ. Portfolio results further show that concentration, volatility, and tail risk do not necessarily produce identical rankings: the most concentrated tangency portfolio generates the highest Sharpe ratio while also exhibiting the most favorable historical VaR and CVaR among the optimized portfolios. The findings demonstrate that global REIT markets remain heterogeneous despite increasing integration and that portfolio evaluation benefits from jointly considering conventional performance, diversification, and tail risk.