publication . Book . Article . 2000

Real estate portfolio construction and estimation risk

Stephen Lee; Simon Stevenson;
Open Access English
  • Published: 01 Jan 2000
  • Publisher: University of Reading
  • Country: United Kingdom
Abstract
The use of MPT in the construction real estate portfolios has two serious limitations when used in an ex-ante framework: (1) the intertemporal instability of the portfolio weights and (2) the sharp deterioration in performance of the optimal portfolios outside the sample period used to estimate asset mean returns. Both problems can be traced to wide fluctuations in sample means Jorion (1985). Thus the use of a procedure that ignores the estimation risk due to the uncertain in mean returns is likely to produce sub-optimal results in subsequent periods. This suggests that the consideration of the issue of estimation risk is crucial in the use of MPT in developing ...
Subjects
free text keywords: General Business, Management and Accounting, General Economics, Econometrics and Finance, Finance, Financial economics, Portfolio optimization, Risk management, business.industry, business, Portfolio investment, Economics, Actuarial science, Replicating portfolio, Portfolio, Real estate, Rate of return on a portfolio, Post-modern portfolio theory
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