Economic diversification in European real estate portfolios

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Abstract
Real estate has an accepted role as a diversification instrument in mixed‐asset portfolios. To diversify within the real estate portfolio is the next step. However, due to lack of data, it is not clear exactly how to diversify. Regional employment characteristics are used here to get an insight into economic diversification possibilities in European real estate portfolios. A modified chi‐square technique was applied to employment shares in 74 European regions. Regions with a common specialization were found to be scattered. This implies that regionally diverse investments are not necessarily economically diverse. Also, many regions were found to be internally diverse.

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