In recent years, increasing attention has been paid the problem of analyzing, evaluating and selecting real estate investments within the context of a portfolio. Most approaches simply attempt to adapt existing theory and models from the well-developed literature of securities investments. Most adaptations or extensions to real estate are not without serious problems, however, because of several fundamental difficulties relating to optimization technology inadequacies and a general lack of reliable and consistent market data.This article deals with the major problems of utilizing some of the classic securities investment models for real estate. Further, a risk-return model is advanced which overcomes most of the fundamental problems outlined earlier in the article. Copyright American Real Estate and Urban Economics Association.
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