The purpose of this paper is to examine the effectiveness of housing as a property investment vehicle. In this analysis, the performance and diversification benefits of housing over 1996‐2007 are investigated.
Sharpe and Sortino ratios were employed to assess the risk‐adjusted performance of housing and major financial and real estate assets. Correlation analysis was also employed to examine the portfolio diversification benefits of housing.
The study found that housing is an effective property investment vehicle in which it delivers the highest risk‐adjusted returns and reveals negative correlation with major assets. The enhancement of these attractive features is also evident in recent years.
This study has implications for investor who seek to include housing as part of their portfolio. The analysis and results are limited by the quality of the data.
This study is one of the few studies in housing investment, particularly the housing market in Australia. Additionally, this study is probably the first attempt to assess the downside risk of housing.
