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The Real Estate Asset Allocation Decision: Monetary Policy Implications

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  • Gerald Buetow
  • Robert Johnson

Abstract

Executive Summary. Previous research establishes that Federal Reserve monetary policy influences both stock and bond returns. This research extends past research and shows that similar patterns exist for real estate investment trust returns. We find that the correlation structure of asset returns changes with alternative monetary policy environments. Mean-variance analysis indicates that optimal asset allocations differ dramatically in different monetary policy environments, and that the exposure to real estate should be prominent only in expansive environments. Overall, the findings suggest that investors may wish to realign their portfolios in reaction to, or anticipation of, Federal Reserve actions.

Suggested Citation

  • Gerald Buetow & Robert Johnson, 2001. "The Real Estate Asset Allocation Decision: Monetary Policy Implications," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 7(3), pages 215-223, January.
    • Handle: RePEc:taf:repmxx:v:7:y:2001:i:3:p:215-223
    DOI: 10.1080/10835547.2001.12089647
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