Jakub Pacholec https://orcid.org/0000-0003-2144-6696

© Jakub Pacholec. Article available under the CC BY-SA 4.0 licence


(English) PDF


The REIT (Real Estate Investment Trust) returns demonstrate a time-varying linear correlation with various equity indexes, therefore they are fit for multi-asset portfolio enhancement. On the one hand, each REIT sector is characterised by a unique set of return properties, and on the other, companies within those sectors remain homogenous.
The aim of this research is twofold: firstly, to verify the earlier studies on how adding REITs to mixed equities/bonds portfolios affects their risk and return characteristics, and secondly, to contribute to these studies by examining the impact of adding different REIT sectors to such portfolios over a relatively long and more up-to-date sample, i.e. the period of 1990–2019.
The results indicate that, in contrast to what some previous studies suggested, adding the REIT index exposure leads to a limited portfolio enhancement only. More significant and consistent effects can be achieved by the inclusion of individual REIT sectors in an investment portfolio. Apartment REITs offered diversification benefits across the entire spectrum in all the periods, while Industrials were useful across the curve in 1990s and 2010s. Self-storage exposure, on the other hand, improved the investment portfolio performance in each of the studied decades. In general, it was enough for investors who strived for portfolio improvement over the three decades between 1990 and 2019 to have a small portion of their Value holdings replaced with the REIT sector exposure to obtain a positive impact on both the returns and the risk.


REIT, real estate, portfolio


G11, R33, R39


Bhuyan, R., Kuhle, J., Ikromov, N., & Chiemeke, C. (2014). Optimal Portfolio Allocation among REITs, Stocks, and Long-Term Bonds: An Empirical Analysis of US Financial Markets. Journal of Mathematical Finance, 4(2), 104–112. https://doi.org/10.4236/jmf.2014.42010.

Chiang, K. C. H., & Lee, M-L. (2002). REITs in the decentralized investment industry. Journal of Property Investment & Finance, 20(6), 496–512. https://doi.org/10.1108/14635780210446496.

European Public Real Estate Association. (2019, July). Global Real Estate Total Markets Table. https://prodapp.epra.com/media/EPRA_Total_Markets_Table_-_Q2–2019_-_rev_1564490547486.pdf.

Fidelity Investments. (2016, April). REIT Stocks: An Underutilized Portfolio Diversifier. https://www.reit.com/sites/default/files/media/PDFs/Research/REITStocksAnUnderutilizedPortfolioDiversifier_Fidelity.PDF.

Kuhle, J. L. (1987). Portfolio Diversification and Return Benefit – Common Stocks vs. Real Estate Investment Trusts (REITs). Journal of Real Estate Research, 2(2), 1–9. https://doi.org/10.1080/10835547.1987.12090535.

Lee, S. L. (2010). The Changing Benefit of REITs to the Mixed-Asset Portfolio. The Journal of Real Estate Portfolio Management, 16(3), 201–216. https://doi.org/10.1080/10835547.2010.12089876.

Lee, S., & Stevenson, S. (2005). The Case for REITs in the Mixed-Asset Portfolio in the Short and Long Run. Journal of Real Estate Portfolio Management, 11(1), 55–80. https://doi.org/10.1080/10835547.2005.12089711.

Liang, Y., & McIntosh, W. (1998). REIT Style and Performance. Journal of Real Estate Portfolio Management, 4(1), 69–78. https://doi.org/10.1080/10835547.1998.12089552.

Marzuki, J., & Newell, G. (2016). The significance and performance of UK-REITs in a mixed-asset portfolio. Journal of European Real Estate Research, 9(2), 171–182. https://doi.org/10.1108/JERER-08-2015-0032.

Morningstar. (2016). The Role of REITs in a Portfolio. Potential to increase returns or reduce risk, 1972-2015. https://www.reit.com/sites/default/files/media/PDFs/REITFactSheetDiversification1_16.pdf.

Mueller, G. R., Pauley, K. R., & Morrill, W. K. (1994). Should REITs be Included in a Mixed-Asset Portfolio?. Real Estate Finance, 11(1), 23–28.

Nareit. (2016). Wilshire Research: REITs Were A Key to Increasing Retirement Income. Retrieved January 20, 2021, from https://www.reit.com/data-research/research/wilshire-research-reitswere-key-increasing-retirement-income.

Nareit. (2020). Global Real Estate Investment. Retrieved October 10, 2020, from https://www.reit.com/investing/global-real-estate-investment.

Newell, G., Adair, A., & Kim Nguyen, T. (2013). The significance and performance of French REITs (SIICs) in a mixed-asset portfolio. Journal of Property Investment & Finance, 31(6), 575–588. https://doi.org/10.1108/JPIF-01–2011–0004.

Ott, S. H., Riddiough, T. J., & Yi, H.-C. (2005). Finance, Investment and Investment Performance: Evidence from the REIT Sector. Real Estate Economics, 33(1), 203–235. https://doi.org/10.1111/j.1080-8620.2005.00117.x.

Property Council of Australia. (2017, April 19). Stapled Structures Consultation Paper. https://treasury.gov.au/sites/default/files/2019-03/c2017-t240634-Property-Council.pdf.

Sing, T. F., Tsai, I. C., & Chen, M. C. (2016). Time-Varying Betas of US REITs from 1972 to 2013. The Journal of Real Estate Finance and Economics, 52(1), 50–72. https://doi.org/10.1007/s11146–015–9502–7.

Ye, Z., & Song, D. (2017). Diversification Benefits of REITs in Portfolio Allocation by REIT Property Types. https://econ.unc.edu/wp-content/uploads/sites/38/2017/09/Mayo_Ye_Song_2017.pdf.

Back to top
© 2019–2022 Copyright by Statistics Poland, some rights reserved. Creative Commons Attribution-ShareAlike 4.0 International Public License (CC BY-SA 4.0) Creative Commons — Attribution-ShareAlike 4.0 International — CC BY-SA 4.0