Performance comparison between real estate securities and real estate investment using stochastic dominance and mean-variance analysis

Abstract

Unlike in the past, different choices for real estate investment are now available for investors. Real estate securities were introduced as another alternative investment vehicle for real estate investors. To promote efficient investment in real estate and real estate securities, this paper explores the relative performance of different types of real estate investment including land, town home, single house, and real estate securities in Thailand from April 2008 to May 2016 by applying mean-variance and stochastic dominance techniques. The results of this examination suggest that the real estate market is not efficient and asset allocation plays important role in real estate investment performance. Mean-variance and stochastic dominance analysis report the same result that town home investment dominates single house investment and land investment dominates condominium investment. Beside trying to choose the best real estate or real estate security in their portfolio, investors should put extra effort in finding the proper types of real estate for their portfolio. © 2016, ASERS Publishing House. All rights reserved.