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| Assessing Risk for International Real
Estate Investments Author: Graeme Newell and James R. Webb Start Page: 103 Abstract: Overseas real estate
investment has increased considerably in recent years. The assessment of risk for these
investments, especially for real estate, has thus become very important. This study
assesses the performance of real estate, stocks and bonds in the U.S., Canada, the United
Kingdom, Australia, and New Zealand over the period 1985-93. The results indicate that the
degree of appraisal-smoothing and intertemporal correlation in each of the five
international real estate series is significant, resulting in the need to increase the
real estate risk estimates by 34% to 47%. To account for currency risk over this nine-year
period, currency-adjusted returns and risk were also estimated for investors from each of
these five countries. All risk profiles increased significantly for international
investors when adjusting for currency risk. However, additional portfolio diversification
was achieved using real estate for international investors. |
