Diversification Potential in Real Estate Portfolios

In this paper, we study the international and sectoral diversification potential in realestate portfolios. Building on a unique dataset of direct real estate markets covering 16 OECDcountries over the 1999-2018 period, we introduce a statistical test to compare country-leveland sector-level diversification potential. This new diversification test provides investors andanalysts with a valuable tool as it delivers both estimates and robust significance levels. Theempirical findings for real estate investments broadly reveal that international diversificationdominates sectoral diversification