<abstract xmlns="http://www.w3.org/1999/xhtml"><p> Some authors suggest that the use of standard deviation as a measure of total risk for returns on real estate leads to risk overestimation, as the classical Markowitz model does not account for the skewness of financial data, thus making the results unreliable. According to the available literature, risk calculated on the basis of standard semideviation may actually better reflect the nature of property investment. However, in this context, the question of whether or not this measure will lead to risk underestimation at a time of a downturn in the real estate market, resulting in inadequate investment decisions aggravating investor losses arises. Therefore, the present paper presents portfolios constructed using either classical risk measures or measures based on “downside deviations” of rates of return. The results of investment in these portfolios are analyzed.</p></abstract>

Some authors suggest that the use of standard deviation as a measure of total risk for returns on real estate leads to risk overestimation, as the classical Markowitz model does not account for the skewness of financial data, thus making the results unreliable. According to the available literature, risk calculated on the basis of standard semideviation may actually better reflect the nature of property investment. However, in this context, the question of whether or not this measure will lead to risk underestimation at a time of a downturn in the real estate market, resulting in inadequate investment decisions aggravating investor losses arises. Therefore, the present paper presents portfolios constructed using either classical risk measures or measures based on “downside deviations” of rates of return. The results of investment in these portfolios are analyzed.

Measures of Downside Risk Under Conditions of Downturn in the Real Estate Market

Department of Economics of Industry and Capital Markets Universiy of Lodz

Real Estate Management and Valuation

{"article-title":"Measures of Downside Risk Under Conditions of Downturn in the Real Estate Market"}

Some authors suggest that the use of standard deviation as a measure of total risk for returns on real estate leads to risk overestimation, as the classical...

Measures of Downside Risk Under Conditions of Downturn in the Real Estate Market

Publié en ligne: 08 oct. 2013

Pages: 81 - 87

DOI: https://doi.org/10.2478/remav-2013-0029

Mots clés
downside risk measures, standard semideviation, skewness of financial data, portfolio theory, real estate

This content is open access.

Measures of Downside Risk Under Conditions of Downturn in the Real Estate Market

Publié en ligne: 08 oct. 2013

Pages: 81 - 87

DOI: https://doi.org/10.2478/remav-2013-0029

Mots clésdownside risk measures, standard semideviation, skewness of financial data, portfolio theory, real estate

This content is open access.

Mots clés
downside risk measures, standard semideviation, skewness of financial data, portfolio theory, real estate