Frontiers of Commercial Real Estate Portfolio Performance: Are Sector-Region Efficient Diversification Strategies a Myth or Reality?

Vitor Leone; Geetha Ravishankar

doi:10.1080/09599916.2017.1410851

Frontiers of Commercial Real Estate Portfolio Performance: Are Sector-Region Efficient Diversification Strategies a Myth or Reality?

Research output: Contribution to journal › Article › peer-review

Abstract

This paper departs from the traditional optimisation methods used to evaluate
portfolio performance. Rather, the Stochastic Frontier Analysis approach is used to econometrically determine the benchmark real estate portfolio frontier and subsequently assess the gains from diversifying real estate portfolios along regional and sectoral dimensions in the UK. Portfolio specific inefficiency measures are obtained which indicate whether a portfolio is efficiently diversified and therefore places on the benchmark frontier and if not, the degree to which performance can be improved is quantified. Portfolio specific efficiencies average at 85%-91%, indicating scope to further improve performance. Further, diversification be it on a sectoral or regional dimension, contributes to significantly lower variability in portfolio efficiencies.

Original language	English
Pages (from-to)	95-116
Journal	Journal of Property Research
Volume	35
Issue number	2
DOIs	https://doi.org/10.1080/09599916.2017.1410851
Publication status	Published - 8 Dec 2017

Bibliographical note

© 2017 Informa UK Limited, publishing as Taylor & Francis. This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of Property Research on 8th December 2017, available online: http://www.tandfonline.com/10.1080/09599916.2017.1410851.

Keywords

diversification
portfolios
performance
real estate
sector
regional effects

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10.1080/09599916.2017.1410851

Frontiers of Commercial Real Estate Portfolio Performance
© 2017 Informa UK Limited, publishing as Taylor & Francis. This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of Property Research on 8th December 2017, available online: http://www.tandfonline.com/10.1080/09599916.2017.1410851.
Accepted author manuscript, 188 KB

Cite this

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title = "Frontiers of Commercial Real Estate Portfolio Performance: Are Sector-Region Efficient Diversification Strategies a Myth or Reality?",

abstract = "This paper departs from the traditional optimisation methods used to evaluate portfolio performance. Rather, the Stochastic Frontier Analysis approach is used to econometrically determine the benchmark real estate portfolio frontier and subsequently assess the gains from diversifying real estate portfolios along regional and sectoral dimensions in the UK. Portfolio specific inefficiency measures are obtained which indicate whether a portfolio is efficiently diversified and therefore places on the benchmark frontier and if not, the degree to which performance can be improved is quantified. Portfolio specific efficiencies average at 85%-91%, indicating scope to further improve performance. Further, diversification be it on a sectoral or regional dimension, contributes to significantly lower variability in portfolio efficiencies. ",

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AB - This paper departs from the traditional optimisation methods used to evaluate portfolio performance. Rather, the Stochastic Frontier Analysis approach is used to econometrically determine the benchmark real estate portfolio frontier and subsequently assess the gains from diversifying real estate portfolios along regional and sectoral dimensions in the UK. Portfolio specific inefficiency measures are obtained which indicate whether a portfolio is efficiently diversified and therefore places on the benchmark frontier and if not, the degree to which performance can be improved is quantified. Portfolio specific efficiencies average at 85%-91%, indicating scope to further improve performance. Further, diversification be it on a sectoral or regional dimension, contributes to significantly lower variability in portfolio efficiencies.

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KW - sector

KW - regional effects

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Frontiers of Commercial Real Estate Portfolio Performance: Are Sector-Region Efficient Diversification Strategies a Myth or Reality?

Abstract

Bibliographical note

Keywords

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