Property Investment in Hong Kong

Executive Summary. In this article, Hong Kong transaction-based data collected during the 1980s and 1990s seems to confirm European and American findings that, in terms of risk and return, direct property investment is superior to that of property stocks. Returns from property investment also have a low correlation with that of stocks. Analyses based on the security market line show that property investment in the office, retail, industrial, and residential sectors all yield returns higher than what the market, comprising both property and stocks, required during the decade between 1984 and 1995. Such characteristics suggest that institutional investors in Hong Kong should have included direct property in their portfolios in order to capitalise on its diversification potential and its return/risk superiority. However, direct property is seldom included in their portfolios.This exclusion of direct property from portfolios by fund managers is attributed to the segmentation of the property and stock markets,...

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