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Landmark buildings and diversification opportunities in the residential market

Landmark buildings and diversification opportunities in the residential market PurposeThis article aims to analyze the performance and risk of landmark building in the housing sector and to evaluate their usefulness for a diversification strategy.Design/methodology/approachAfter comparing summary statistics on the performance of landmark building with respect to other types of housing investments, the article evaluates their usefulness for a diversification strategy. The role of landmark buildings is studied using the modern portfolio theory and evaluating the role of this type of asset in the optimal asset allocation. The analysis is performed considering both the risk/return trade-off in a one-year and a multiple-year time horizon.FindingsThe results show that a landmark building can be a good investment opportunity, especially for high-risk/return investors. A not perfect correlation of the returns of this asset class with other types of housing investments implies the existence of a minimum investment in this asset class for almost all portfolios on the efficient frontier. Results are robust with respect to the length of the investment time horizon.Originality/valueThe article presents a unique analysis of intra-housing market diversification opportunities focusing on the role of landmark building in the portfolio construction. Empirical evidence supports the hypothesis that real estate investors can take advantage of investing in landmark buildings in the residential sector as well because there are no reasons to limit such investments to trophy buildings in the office and commercial sectors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png international Journal of Housing Markets and Analysis Emerald Publishing

Landmark buildings and diversification opportunities in the residential market

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-8270
DOI
10.1108/IJHMA-08-2015-0051
Publisher site
See Article on Publisher Site

Abstract

PurposeThis article aims to analyze the performance and risk of landmark building in the housing sector and to evaluate their usefulness for a diversification strategy.Design/methodology/approachAfter comparing summary statistics on the performance of landmark building with respect to other types of housing investments, the article evaluates their usefulness for a diversification strategy. The role of landmark buildings is studied using the modern portfolio theory and evaluating the role of this type of asset in the optimal asset allocation. The analysis is performed considering both the risk/return trade-off in a one-year and a multiple-year time horizon.FindingsThe results show that a landmark building can be a good investment opportunity, especially for high-risk/return investors. A not perfect correlation of the returns of this asset class with other types of housing investments implies the existence of a minimum investment in this asset class for almost all portfolios on the efficient frontier. Results are robust with respect to the length of the investment time horizon.Originality/valueThe article presents a unique analysis of intra-housing market diversification opportunities focusing on the role of landmark building in the portfolio construction. Empirical evidence supports the hypothesis that real estate investors can take advantage of investing in landmark buildings in the residential sector as well because there are no reasons to limit such investments to trophy buildings in the office and commercial sectors.

Journal

international Journal of Housing Markets and AnalysisEmerald Publishing

Published: Oct 3, 2016

References