Exchange rate volatility and international real estate diversification: A comparison of emerging and developed economies

Abstract

This study utilizes direct real estate investment data over ten years (1990-1999 inclusive) for five emerging economies (Thailand, Indonesia, Malaysia, China and the Philippines) and seven developed economies (Singapore, Japan, Hong Kong, France, Britain, Ireland and New Zealand) to examine the performance of emerging real estate markets against those of developed markets with due cognizance of currency risk. The results show that the long-, medium- and short-term performances of a portfolio consisting of emerging economies' real estate is superior to a portfolio of developed economies' real estate and, more significantly, that the emerging economies portfolio's risk (as measured by the coefficient of variation) is lower than that of the developed economies.