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Abstract
Executive Summary.This paper examines whether the asset holdings and weights of an international real estate portfolio using exchange rate adjusted returns are essentially the same or radically different from those based on unadjusted returns. The results indicate that the portfolio compositions produced by exchange rate adjusted returns are markedly different from those based on unadjusted returns. However, following the introduction of the single currency, the differences in portfolio composition are much less pronounced. The findings have a practical consequence for the investor because they suggest that following the introduction of the single currency international investors can concentrate on real estate fundamentals when making their portfolio choices, rather than worry about the implications of exchange rate risk.
This paper is the winner of the best paper on International Real Estate Investment/Portfolio Management (sponsored by Jones Lang LaSalle) award presented at the 2006 American Real Estate Society Annual Meeting in Key West, Florida.