Faculty Publications


The real estate asset allocation decision: Monetary policy implications

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Previous research establishes that Federal Reserve monetary policy influences both stock and bond returns. This research extends past re-search and shows that similar patterns exist for real es-tate investment trust returns. We find that the correlation structure of asset returns changes with alternative mon-etary policy environments. Mean-variance analysis in-dicates that optimal asset allocations differ dramatically in different monetary policy environments, and that the exposure to real estate should be prominent only in ex-pansive environments. Overall, the findings suggest that investors may wish to realign their portfolios in reaction to, or anticipation of, Federal Reserve actions.