Author: Petros S. Sivitanides

Start Page: 159
End Page: 168
Volume: 4
Issue Number: 2
Year: 1998
Publication: Journal of Real Estate Portfolio Management

Abstract: This study uses annual NCREIF returns to examine the implications of the Downside-Risk (DR) approach for real estate portfolio structuring and to identify the biases that may be introduced by the Modern Portfolio Theory (MPT) approach. The results indicate that the most efficient portfolio differs across investors with different Minimum Required Return (MRR) levels. They also suggest that the MPT and DR approaches produce optimal portfolios with different compositions only within a limited range of returns on the efficient frontier. In the case of investors with an MRR equal to the risk-free rate or the average NCREIF return, MPT portfolios are only minimally less efficient than the respective DR portfolios.