Abstract
Executive Summary. Previous research has documented the risk-reduction benefits of international real estate securities to a real estate portfolio, but has stopped short of examining the effect of these securities on a mixed-asset portfolio. To this end, this study evaluates international real estate securities within the framework of a mixed-asset portfolio consisting of U.S. stocks, U.S. corporate bonds, U.S. real estate securities, and international common stocks. Each asset class was examined from a risk-return perspective and the results indicate that international real estate securities offer significant diversification benefits for a U.S. mixed-asset portfolio for a U.S. investor. In order to examine the risk-reduction potential from international property stocks on a U.S. mixed-asset portfolio, efficient frontiers were constructed for each combination of asset classes. This study covers a thirteen-year time span from 1984 through 1997.
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