Author: Rakesh Bharati and Manoj Gupta

Start Page: 469
End Page: 484
Volume: 7
Issue Number: 4
Year: 1992
Publication: Journal of Real Estate Research

Abstract: We examine the issue of optimal asset allocation among three broad classes of assets?Large Stocks (proxied by the S&P composite index); real estate assets (a portfolio of thirty Equity Real Estate Investment Trusts (REITs) traded on major stock exchanges); and the risk-free asset (the one-month T-bill), employing the evidence on their predictability. An active strategy of investing in the assets, using predicted returns from our model outperforms investing in passive strategies, which are combinations of asset classes with fixed weights for the entire period of the study. Thus our superior performance is not due to diversification alone.