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This paper provides a critical review of research on international direct real estate investment issues. To date, no review article has explored the various findings of studies completed on the benefits of international real estate diversification. In the past 10 years, the quantity and variety of work have increased dramatically. The paper is organised by how investing in a real estate asset is analysed: in a mixed-asset portfolio context or a real-estate-only portfolio context. A fourth section focuses on research that has explored currency risk, one of the prevailing risks associated with international investing. The last section provides conclusions about the research and offers ideas for future research in this growing area of real estate investment.

This paper summarises the various findings of studies completed on the benefits of international diversification using real estate stocks. With the increased availability of data and analytical tools, the quantity and variety of work over the past decade have increased dramatically in this area. The first two sections of the paper chronologically review the studies, focusing on how the diversification benefits are analysed: in a mixed-asset portfolio context or a real-estate-only portfolio context. The third section highlights work that uses alternative analyses to the traditional mean-variance framework to examine the international real estate stock as an investment alternative. Almost all of the studies reach the same conclusion: diversification gains are possible but are often reduced if currency risk is included in the analysis.

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