Journal of Construction Engineering and Project Management

Korea Institute of Construction Engineering and Management (한국건설관리학회)
권호 표지
DOI QR코드

DOI QR Code

Method for Composing a Portfolio for REITs Investment Using Markowitz's Portfolio Model

  • Lee, Chi-Joo (Department of Architectural Engineering, Yonsei University) ;
  • Lee, Ghang (Department of Architectural Engineering, Yonsei University) ;
  • Won, Jong-Sung (Department of Architectural Engineering, Yonsei University)
  • Published : 2011.12.30
Download PDF
⟨ Previous Next ⟩

Abstract

Domestic construction companies are suffering from financing difficulties in the wake of the economic slump in Korea and abroad. During this economic slump, real estate investment trusts (REITs), facilitators for improving financing and stimulating construction businesses, have increasingly expanded since their introduction in 2001. However, in terms of growth speed and marketing size, Korean REITs are falling behind those of other nations. The purpose of this study is to suggest a method for composing a portfolio using the Markowitz portfolio selection model to stimulate REITs. The main contents are as follows. First, a comparative analysis was conducted of increased REIT profit with the application of the Markowitz model and the average REIT profit rate from July 3, 2007, to July 21, 2008, during the investment analysis periods. The results showed that the total profit rate from the Markowitz model was about 10% higher than the average REIT profit rate. Second, the sensitivity was analyzed according to the portfolio's data-gathering and replacement cycle to measure the optimum cycle and yield. The six-mouth profit data collection period showed about 16% higher profits with the Markowitz model than with the REITs. The two-week portfolio change period resulted in about 11% higher profits with the Markowitz model than with the REITs.

Keywords

References

  1. Choi, C. S., "A Study Related to the REITs' Profit Rate Prediction Model", Property Appraisal Study, Vol. 15(1), pp. 45-77, 2005
  2. Hong, J. Y., and Lee, Y. M., "Real Property Investment Portfolio Effects in Each Region", Property Appraisal Study, Vol. 13(1), pp. 181-195, 2003
  3. Jang, B. G., and Shim, S. H., "REITs in Korea, Real Estate? Or Stocks", Residential Research, Vol. 15(2), pp. 31-52, 2007
  4. Ji, H. J., "The Circulatory Relationship of the Stock Market, the Bond Market, and the Real Estate Market", Korea Management Association, Vol. 27(5), pp. 1277-1296, 1999
  5. Jung, H. N., Choi, S., Kwon, T. J., Gang, S. I., Song, H. B., and Lee, H. S., "A Study on the Activation of the REITs Policy for the Advancement of the Real Estate Market", Korea Research Institute for Human Settlements, 2008
  6. Jung, J. M., "Analysis of the Efficiency and the Covariance of the Real Estate Market", Korea Money and Finance Association, Vol. 4(2), pp. 169-2004, 1999
  7. Jung, W. G., and Lee, S. Y., "A Study Related to the Prediction of the Joint Residential Price Index Using an Artificial Neural Network: Focused on the Seoul Region", Residential Research, Vol. 15(3), pp. 39-64, 2007
  8. Kim, B. S., "A Study on the Mutual Relationship of REITs and the Stock Market: Kocreb No. 1 CR Reits&Kyobo-Merits CR Reits", Korean Academic Society of Business Administration, Combined Symposium, pp. 1-23, 2007a
  9. Kim, D. W., "REITs Index Profit Rate Analysis for the Prediction of the Real Estate Market", Korean Operations Research and Management Science Society / Korean Institute of Industrial Engineers, Joint Spring Symposium, pp. 945-951. 2007b
  10. Kim, E. H., "Analysis of the Relationship of the Stock Price and Achievement Measurement of REITs", National Physical Planning, Vol. 39(4), pp. 193-2002, 2004
  11. Kim, S. J., "A Study on the Asset Management of Real Estate Funds: Focused on Empirical Office Data", Konduk university, Seoul, 2005
  12. Kim, S. J., "A Study on the Diversified Investment of Office Buildings Using an Office Index", Property Appraisal Study, Vol. 16(2), pp. 49-70, 2006
  13. Kim, S. M., and Kim, H. S., "Comparison of the Investment Performance of Markowitz's Portfolio Selection Model Using Nonlinear Programming and Samsung Group Funds in the Korean Stock Market", Korean Academic Society of Business Administration, Spring Symposium, pp. 76-94, 2008
  14. Kwak, S. J., and Lee, J. S., "he Effect of the Real Estate Policy on the Fluctuating Changes in Residential Prices: Focused on the Changing Point in the Fluctuation of Residential Prices", Residential Study, Vol. 14(2), pp. 175-194, 2006
  15. Lee, Y. J., and Jin, K. H., "A Comparative Study of the Performance of Each Mathematical Programming for the Selection of the Optimum Portfolio: Focused on the TSV Model and the TASD Model", Collection of Administrative Treatises, Vol. 18(2), pp. 35-58, 2000
  16. Lee, Y. M., "A Study on the Risk Management and Portfolio of Real Estate Investment: Focused on the Measurement of VAR", Real Estate Study, Vol. 7(1), pp. 33-47, 2000
  17. Lim, E. S., "A Study on the Effects of the REITs Portfolio", Property Appraisal Study, Vol. 14(1), pp. 141-162, 2004
  18. Lim, J. M., "A Study on the Relationship of Real Estate Profits and Asymmetrical Risk Measurement", Korea Real Estate Analysis Association, Spring Symposium, 2005
  19. Park, R. I., "The Backgrounds and Initiative Strategies on the Implementation of REITs in Construction Companies", Construction Management Technologies and Trends, Korea Institute of Construction Engineering and Management, 2003a
  20. Park, W. S., "Analysis of the Profit Rate Properties of REITs: Focused on the Comparative Analysis between Korea and the USA", Geographical Study, Vol. 37(4), pp. 455-471, 2003b
  21. Park, W. S., and Park, Y. K., "The Effects of REITs Implementation on the Real Estate Market and the Financial Market", Korean Association of Applied Economics, Vol. 2(1), pp. 47-68, 2000
  22. Seo, H. S., "A Study Related to the Effects of the Real Estate Portfolio", Korea Real Estate Academy, Vol. 16, pp. 89-106, 1999
  23. Seo, S. H., "The Construction of a Combined Prediction Mechanism and the Leading Real Estate Price Index", Korea Regional Society, Vol. 21(1), pp. 3-19, 2005
  24. Sohn, J. S., Kim, K. Y., and Kim, Y. S., "A Study on the Prediction Model of Real Estate Prices." Korean Association for Housing Policy Studies, Vol. 11(1), pp. 49-75, 2003
  25. Um, C. J., "A Study on the Usefulness of the Optimum Asset Distribution Theory", Study on Industry and the Economy, Vol. 16(5), pp. 17-26, 2003
  26. Yoo, H. J., "The Effects of the Residential Policy on the Instability of Residential Prices", National Policy Study, Vol. 22(2), pp. 75-114, 2008