Pension‐Plan Real Estate Investment in an Asset–Liability Framework

Pension‐Plan Real Estate Investment in an Asset–Liability Framework This study explores the role of pension‐plan real estate investment in an asset–liability framework. By assuming that the pension‐plan manager wishes to have assets of at least equal value to the liabilities at all points in time, an asset selection process is derived which depends on both the asset's covariance with other assets and its covariance with the liability stream. We generally find real estate not to be highly correlated with pension‐plan liabilities. This finding is of general interest, since it helps to explain why pension‐plan real estate investment is extremely limited and much smaller than one would expect if pension‐plan investors cared only about the mean and variance of the real return to their invested wealth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Economics Wiley

Pension‐Plan Real Estate Investment in an Asset–Liability Framework

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Publisher
Wiley
Copyright
Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1080-8620
eISSN
1540-6229
D.O.I.
10.1111/1540-6229.00809
Publisher site
See Article on Publisher Site

Abstract

This study explores the role of pension‐plan real estate investment in an asset–liability framework. By assuming that the pension‐plan manager wishes to have assets of at least equal value to the liabilities at all points in time, an asset selection process is derived which depends on both the asset's covariance with other assets and its covariance with the liability stream. We generally find real estate not to be highly correlated with pension‐plan liabilities. This finding is of general interest, since it helps to explain why pension‐plan real estate investment is extremely limited and much smaller than one would expect if pension‐plan investors cared only about the mean and variance of the real return to their invested wealth.

Journal

Real Estate EconomicsWiley

Published: Sep 1, 2000

References

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