Previous research has questioned the stability of international equity diversification. This study examines whether foreign real estate exists in a more segmented market and whether foreign real estate provides any diversification benefit beyond that obtainable from foreign stocks. Using data encompassing the stock market crash of 1987, foreign real estate was found to have a lower correlation with U.S. stocks than foreign stocks. This lower correlation is shown to be stable through time as foreign real estate has a lower correlation in nearly the entire time period. Foreign real estate was also found to have a significant weight in efficient international portfolios.

Document Type


Publication Date

Winter 2002

Publisher Statement

Copyright © 2002 American Real Estate Society. This article first appeared in Journal of Real Estate Portfolio Management 8, no. 1 (Winter 2002): 17-25.

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