Real estate investment optimal portfolio selection: a case study of European countries

Abstract

The paper concentrates on aspects of real estate investment risk management and highlights risk reduction abilities of diversified investment portfolio. The core problem of the paper is the investment decision making under risk which can arise due to instable market conditions and ever changing levels of prices. Throughout the investigation of this problem could be useful, in both practical and theoretical areas, to provide an insight of riskiness of investment possibilities in Western and Eastern Europe as well as to provide material for further theoretical investigations. The main goal of this work is to discuss the nature of real estate investment risks and to form real estate investment portfolio with application to European markets in order to find an investment solution according to risk. Altogether with mean-variance portfolio scheme, the idea of adequate for stochastic nature of investment efficiency portfolio is used in constructing corresponding three-investment portfolio sets helping to select optimal ones for different investors.