#2006-028A "Investing for the Long-Run in European Real Estate"
by Carolina Fugazza, Massimo Guidolin, and Giovanna Nicodano
May 2006

We calculate optimal portfolio choices for a long-horizon, risk-averse investor who diversifies among European stocks, bonds, real estate, and cash, when excess asset returns are predictable. Simulations are performed for scenarios involving different risk aversion levels, horizons, and statistical models capturing predictability in risk premia. Importantly, under one of the scenarios, the investor takes into account the parameter uncertainty implied by the use of estimated coefficients to characterize predictability. More...

PUBLISHED: Journal of Real Estate Finance and Economics, January 2007, 34(1), pp. 35-80