The significance and performance of South Korean REITs in a mixed-asset portfolio

This paper examines the risk and return characteristics of K-REITs and the correlation of Korean real estate investment trusts (K-REITs) to other asset classes and their diversification potential in a mixed-asset portfolio. The data were monthly total returns from January 2002 to December 2010 for South Korean REITs, bonds, shares, and property companies. The results reveal that K-REITs performed poorly over the entire period as compared to shares, bonds, and property companies. Consequently, K-REITs did not represent a substantial weight in a mixed-asset portfolio. However, K-REITs have a low correlation with shares and property companies, suggesting some level of diversification potential for share and property investors.