La diversificazione del rischio degli investimenti immobiliari: un esperimento con dati Italiani

The investment in real estate assets is a widespread phenomenon between the Italian households and it has assumed an increasing importance through the last decades. The aim of the essay is to provide a solution for the diversification of the real estate risk. Thus I consider the real estate property as a component of a portfolio management strategy, then I construct an optimal portfolio which is hedged against the housing risk. The present analysis could be interesting for both a private and an institutional investor which has a share of his/her wealth invested in real estate. In Chapter 2, I offer an overview of the Italian real estate market, in terms of importance and dimension and it explains the main differences of investing directly in properties or indirectly in real estate investment funds. Each paragraph is dedicated to the description of these two kinds of investments, separately. In particular, the first part of the chapter provides the data on the Italian real estate property holdings, from 1995 to 2011. Moreover it describes both the positive aspects of this kind of investment and its sources of risk. Instead, the second part of the chapter shows the evolution of the Italian real estate investment funds, between 1999 and 2011, and describes the main characteristics of this market. Then it focuses on the risk estimation of this market, based on the work of Bianchi and Chiabrera (2012). In fact they study the financial profile and the income structure of these funds, and estimate their default probability with the Monte Carlo simulator. From this analysis, I found that Italian households have a consistent share of their total assets invested in real estate properties. For this reason I would investigate two principal issues: if it is an efficient strategy to include such a big amount of real estate property in an investment portfolio and how to diversificate the risk arising from the real estate holdings. These two topics are developed the in the central chapter, dedicated to the empirical analysis. In order to diversify the composition of a portfolio, I have to reduce its risk, expressed by its variance; therefore one of the possible strategies is to minimize the portfolio variance. For this reason I decided to follow the theoretical framework of the De Roon, Eichholtz and Koedijk (2002) experiment on USA real estate portfolio diversification, and apply it to Italian data. Their work consists of computing the optimal portfolio weights for each asset class composing the Global Minimum Variance portfolio, in order to minimize the invertors' portfolio variance, and therefore their risk exposure. From this analysis I found that the real estate risk is underestimated by the traditional measure of risk (the returns variance) and as a consequence the performance of this asset class is overvalued. The last chapter investigate how the literature proposes to correct the traditional measures of risk, in order to capture the illiquidity problem characterizing real estate. In Chapter 4, I analyse how the literature deals with the problem of illiquidity of real estate assets, and the consequent underestimation of the traditional measures of risk.In particular I consider two cases: the first work proposes an ARMA model to estimate the smoothed return process which characterizes illiquid assets. The second paper provides an ex-ante risk measure which incorporates risk and the non I.I.D. nature of real estate returns distribution.