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When adding real estate to an asset allocation program that currently includes only stocks, bonds, and...

When adding real estate to an asset allocation program that currently includes only stocks, bonds, and cash, which of the properties of real estate returns affect portfolio risk? (Select all that apply.)

i. Standard deviation. ii. Expected return. iii. Correlation with returns of the other asset classes.

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Answer #1

When we are adding real estate to the Asset allocation program then overall portfolio risk will be getting affected by various properties of real estate like-

A. Standard deviation- standard deviation is related to the overall risk of the portfolio and the standard deviation of the stock will also impact the overall risk of the portfolio

C. correlation with return with other asset classes is important in order to impact the level of diversification in the portfolio.

Expected rate of return is not important.

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