Journal of Asset Management

, Volume 8, Issue 6, pp 361–373

Diversifying in public real estate: The ex-post performance


  • Carolina Fugazza
    • Manchester Business School, MAGF; MBS Crawford House
  • Giovanna Nicodano

DOI: 10.1057/palgrave.jam.2250089

Cite this article as:
Fugazza, C., Guidolin, M. & Nicodano, G. J Asset Manag (2008) 8: 361. doi:10.1057/palgrave.jam.2250089


We calculate the ex-post, realised portfolio performance for an investor who diversifies among US stocks, bonds, real estate indirect investment vehicles (E-REITS), and cash. Simulations are performed for two alternative asset allocation frameworks — classical and Bayesian — and for scenarios involving two different samples and six different investment horizons. Interestingly, the ex-post welfare cost of restricting portfolio choice to traditional financial assets (ie, stocks, bonds, and cash) is only found to be positive in all scenarios for a Bayesian investor. On the contrary, substitution of E-REITS for stocks in optimal portfolios turns out to reduce ex-post portfolio performance over the nineties and for a Classical investor who ignores parameter estimation uncertainty.


optimal asset allocationreal estateparameter uncertaintyout-of-sample performance

Copyright information

© Palgrave Macmillan Ltd 2008