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| Diversification Benefits of U.S. Real
Estate to Foreign Investors Author: Alan J. Ziobrowski and Richard Curcio Start Page: 119 Abstract: Substantial empirical
evidence has been offered that supports the notion that international diversification
enhances portfolio performance. Another large body of research suggests that the addition
of real estate to pure financial asset portfolios also provides improved mean-variance
efficiency. Thus, it is logical to hypothesize that the greatest gains are available from
international mixed-asset portfolios that include both foreign financial assets and
foreign real estate. This study investigates this hypothesis as an explanation for the
large purchases of U.S. real estate by foreign investors. The results indicate that U.S.
real estate does not improve foreign portfolio performance. The evidence suggests that
volatile exchange rate fluctuations induce a level of risk in these assets that offsets
any potential diversification benefits to foreign investors. |
