literature review

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Diversification is defined as a method to remove unsystematic risks under the context of mean-variance. Optimal diversification is a collection of portfolios that obtain the highest returns under a certain level of risk or achieve the lowest risk under a given return level. An increasing number of researchers have investigated the optimal method to diversify real estate investment portfolios. An ingenious and appropriate diversification method can bring many benefits to investors,in particular, by reducing investment risk and increasing returns. In general, there are two methods to diverse property portfolios, namely diversification by real estate type and diversification by geographic region. In general, there are three types of real estate in property portfolios: retail, office, and industrial. Many investors pursue the benefits of diversifying investment portfolios through international markets. However, since many countries have limited returns datasets of real estate portfolios, to obtain accurate analysis results about the performance of investment portfolios becomes very difficult. How can diversification be accomplished with insufficient data? What is the best way to achieve property investment portfolio diversification: by region or by type? Should real estate be included in an efficient portfolio? Are real estate investment trusts (REITs) is a good implement to diversify mixed-asset portfolios? These questions have stimulated my great interest. The main purpose of this study is to review the relevant literature and to answer these questions.


Every researcher has different points of emphasis when analysing and managing property portfolios. Several researchers are concerned about economic aspects tha...

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...imal portfolio for UK and US at any of the three risk levels (low, medium, and high). Under income return analysis, retail and office portfolios are dominated by the US for all three risk levels, while medium- and high-risk industrial portfolios are dominated by the UK property portfolios. Furthermore, in the appreciation return analysis, retail, office and industrial portfolios are all dominant in the UK for medium and high risk levels; however, low-risk portfolios for all the three types property are dominated by the US. When considering income return and appreciation together, for all types of property, US dominates all risk level portfolios, except for low-risk retail and high-risk industrial properties. When all returns are considered simultaneously, both the portfolio of low-risk retail income and high-risk industrial income are dominated by the UK property.
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