Evaluating managers diversification of real estate portfolios: evidence from Nigeria.

Grissom, T. V., Kuhle, J. L. and Walther, C. H. (1987) Diversification Works in Real Estate Too. Journal of Real Estate Portfolio Management, 13(2), p. 66-67.

Hadaway, S. C. (1978) Diversification Possibilities in Agricultural Land Investments. The Appraisal Journal, p. 529-537.

Hargitay, S. E. and Yu, S. (1993) Property Investment Decisions: A Quantitative Approach, E&FN Spon, New York.

Hartzell, D. J., Hekman, J. S. and Miles, M. E. (1986) Diversification Categories in Investment Real Estate. AREUEA Journal, 14(2), p. 230-254.

Hartzell, D. J., Shulman, D. G. and Wurtzebach, C. H. (1987) Refining the Analysis of Regional Diversification for Income-Producing Real Estate. Journal of Real Estate Research, 2(2), p. 85-95.

Lee, S. L. (2005) The Return Due to Diversification of Real Estate to the U.S. Mixed-Asset Portfolio. Journal of Real Estate Portfolio Management, 11(1), p. 19-28.

Lee, S. and Stevenson, S. (2005) Testing the Statistical Significance of Sector and Regional Diversification. Journal of Property Investment and Finance, 23(5), p. 394-411.

Liow, K., Ooi, J. and Gong, Y. (2005) Cross Market Dynamics in Property Stock Markets: Some International Evidence. Journal of Property Management and Finance, 22(5), p. 401-413.

Markowitz, H. M. (1952) Portfolio Selection. Journal of Finance, 3, p. 77-91.

Markowitz, H. M. (1959) Portfolio Selection: Efficient Diversification of Investments, John Wiley & Sons, New York.

Miles, M. E. and McCue, T. E. (1982) Historic Returns and Institutional Real Estate Portfolio. AREUEA Journal, 10(2), p. 184-198.

Mueller, G. R. (1993) Refining Economic Diversification Strategies for Real Estate Portfolios. Journal of Real Estate Research, 8(1), p. 55-68.

Olaleye, A. (2000) A Study of Property Portfolio Management Practice in Nigeria, Unpublished M.Sc Dissertation of the Department of Estate Management, Obafemi Awolowo University, Ile-Ife.

Pagliari, J. L. (Jr), Webb, J. R. and Del Casino, J. J. (1995) Applying MPT to Institutional Real estate Portfolios: The Good, the Bad and the Uncertain. Journal of Real Estate Portfolio Management, 1(1), p. 67-88.

Viezer, T. W. (2000) Evaluating Within Real Estate Diversification Strategies. Journal of Real Estate Portfolio Management, 6(1), p. 75-95.

Abel OLALEYE (1) ([email]) and Bioye Tajudeen ALUKO (2)

(1) Department of Estate Management, Obafemi Awolowo University, Ile--Ife, Nigeria E-mail: a_olaleye2000@yahoo.co.uk

(2) Department of Estate Management, Obafemi Awolowo University, Ile--Ife, Nigeria E-mail: btaluko@oauife.edu.ng Table 1. Average Return Statistics per annum (%) (1997-2001) Property type Manager A 2 Bedroom flats: Mean ([R.sub.i]): 22.70

Property 1 Std. ([delta]): 2.38

([R.sub.i]-[R.sub.f])/[delta]: 3.49 3-4 Bedroom bungalow: Mean ([R.sub.i]): 16.55

Property 2 Std. ([delta]): 1.321

([R.sub.i]-[R.sub.f])/[delta]: 1.643 3-4 Bedroom duplexes: Mean ([R.sub.i]): --

Property 1 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bed detached house: Mean ([R.sub.i]): --

Property 2 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bedroom flat: Mean ([R.sub.i]): --

Property 3 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: Property type Manager B 2 Bedroom flats: Mean ([R.sub.i]): --

Property 1 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bedroom bungalow: Mean ([R.sub.i]): --

Property 2 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bedroom duplexes: Mean ([R.sub.i]): 11.12

Property 1 Std. ([delta]): 1.719

([R.sub.i]-[R.sub.f])/[delta]: -1.896 3-4 Bed detached house: Mean ([R.sub.i]): 24.49

Property 2 Std. ([delta]): 1.387

([R.sub.i]-[R.sub.f])/[delta]: 7.289 3-4 Bedroom flat: Mean ([R.sub.i]): 11.77

Property 3 Std. ([delta]): 0.430

([R.sub.i]-[R.sub.f])/[delta]: -6.070 Property type Manager C 2 Bedroom flats: Mean ([R.sub.i]): --

Property 1 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bedroom bungalow: Mean ([R.sub.i]): --

Property 2 Std. ([delta]):

([R.sub.i]-[R.sub.f])/[delta]: 3-4 Bedroom duplexes: Mean ([R.sub.i]): 23.75

Property 1 Std. ([delta]): 0.891

([R.sub.i]-[R.sub.f])/[delta]: 10.516 3-4 Bed detached house: Mean ([R.sub.i]): 19.76

Property 2 Std. ([delta]): 1.685

([R.sub.i]-[R.sub.f])/[delta]: 3.194 3-4 Bedroom flat: Mean ([R.sub.i]): 22.38

Property 3 Std. ([delta]): 2.620

([R.sub.i]-[R.sub.f])/[delta]: 3.053 Note: [R.sub.f] (the average returns on Treasury bills for the period) = 14.38%. The three managers' identities are not disclosed in this paper due to Nigerian property market. Table 2. Returns and Standard Deviation of Benchmark Portfolios

Portfolio Standard

Return Deviation Strategies ([R.sub.p]) (Std) Manager Diversification Only All investment funds in 19.63 0.878

Manager A All investment funds in 15.79 0.294

Manager B All investment funds in 21.96 1.154

Manager C Equal allocation to each 19.13 0.257

manager Managers and Property type Diversification 1. Equal to managers 19.13 0.253

and property types 2. Equal to managers and 19.19 1.257

allocation to one

property type in each

manager's

portfolio (1) --Ditto-- Portfolio 2 22.32 0.878 --Ditto-- Portfolio 3 18.95 0.388 --Ditto-- Portfolio 4 23.19 0.274 --Ditto-- Portfolio 5 18.08 0.858 --Ditto-- Portfolio 6 17.14 0.521 --Ditto-- Portfolio 7 20.27 0.447 --Ditto-- Portfolio 8 16.90 1.258 --Ditto-- Portfolio 9 21.14 1.142 --Ditto-- Portfolio 10 17.36 0.362 --Ditto-- Portfolio 11 15.81 0.881 --Ditto-- Portfolio 12 23.65 1.216 --Ditto-- Portfolio 13 16.68 1.218

Mean/Std

Eff. Of ([R.sub.p]/ Strategies Diversification [delta]) Manager Diversification Only All investment funds in 0.5257 22.358

Manager A All investment funds in 0.7506 53.708

Manager B All investment funds in 0.3337 19.029

Manager C Equal allocation to each 0.6684 74.436

manager Managers and Property type Diversification 1. Equal to managers 0.8406 75.613

and property types 2. Equal to managers and 0.2446 15.267

allocation to one

property type in each

manager's

portfolio (1) --Ditto-- Portfolio 2 0.5171 25.421 --Ditto-- Portfolio 3 0.7856 56.065 --Ditto-- Portfolio 4 0.8713 84.635 --Ditto-- Portfolio 5 0.4276 21.072 --Ditto-- Portfolio 6 0.6023 32.898 --Ditto-- Portfolio 7 0.6947 45.347 --Ditto-- Portfolio 8 0.1366 13.434 --Ditto-- Portfolio 9 0.3570 18.511 --Ditto-- Portfolio 10 0.5891 47.956 --Ditto-- Portfolio 11 0.4406 17.946 --Ditto-- Portfolio 12 0.2170 19.449 --Ditto-- Portfolio 13 0.3545 13.695 Eff. of Diversification = Effectiveness of Diversification Table 3. Diversification by Managers (efficient portfolios)

Portfolio Standard

Return Deviation Eff. of Portfolios ([R.sub.p]) (Std) Diversification Corr. of +1.0 21.96 1.154 0.4560 Corr. of +0.5 19.35 0.267 0.5876 Corr. of +0.1 18.04 0.235 0.6206 Corr. of -0.1 17.89 0.235 0.6067 Corr. of -0.5 17.92 0.237 0.6065 Corr. of -1.0 20.69 0.299 0.5460

Percentage

Mean/Std allocations