2000
Abstract:
Which real estate portfolio is better diversified: one with
properties in the San Francisco Bay Area and Greater Los
Angeles, or one with properties in Tokyo and Honolulu? In other
words, is geographical distance the crucial element that determines
the level of systematic risk shared between two real estate markets?
Not necessarily. Consider that the Japanese economy of the late 1980s
produced a surge of tourism to and investment in Hawaii, so much so
that the impact of Japan’s subsequent recession is still being felt there.
This economic link allowed movements in Tokyo’s real estate markets
to echo in Hawaii’s, despite the ocean, languages, currencies, and national
borders that separate them.
