Real estate portfolio size and risk reduction

The reduction of portfolio risk is important to all investors but is particularly important to real estate investors as most property portfolios are generally small. As a consequence, portfolios are vulnerable to a significant risk of under-performing the market, or a target rate of return and so investors may be exposing themselves to greater risk than necessary. Given the potentially higher risk of underperformance from owning only a few properties, we follow the approach of Vassal (2001) and examine the benefits of holding more properties in a real estate portfolio. Using Monte Carlo simulation and the returns from 1,728 properties in the IPD database, held over the 10-year period from 1995 to 2004, the results show that increases in portfolio size offers the possibility of a more stable and less volatile return pattern over time, i.e. down-side risk is diminished with increasing portfolio size. Nonetheless, increasing portfolio size has the disadvantage of restricting the probability of out-performing the benchmark index by a significant amount. In other words, although increasing portfolio size reduces the down-side risk in a portfolio, it also decreases its up-side potential. Be that as it may, the results provide further evidence that portfolios with large numbers of properties are always preferable to portfolios of a smaller size.

The relationship between size, diversification and risk

Property portfolio diversification takes many forms, most of which can be associated with asset size. In other words larger property portfolios are assumed to have greater diversification potential than small portfolios. In addition, since greater diversification is generally associated with lower risk it is assumed that larger property portfolios will also have reduced return variability compared with smaller portfolios. If large property portfolios can simply be regarded as scaled-up, better-diversified versions of small property portfolios, then the greater a portfolio’s asset size, the lower its risk. This suggests a negative relationship between asset size and risk. However, if large property portfolios are not simply scaled-up versions of small portfolios, the relationship between asset size and risk may be unclear. For instance, if large portfolios hold riskier assets or pursue more volatile investment strategies, it may be that a positive relationship between asset size and risk would be observed, even if large property portfolios are more diversified. This paper tests the empirical relationship between property portfolio size, diversification and risk, in Institutional portfolios in the UK, during the period from 1989 to 1999 to determine which of these two characterisations is more appropriate.

Ownership, occupation and risk: a view of the City of London office market

Office returns in the City of London are more volatile than in other UK markets. This volatility may reflect fluctuations in capital flows associated with changing patterns of ownership and the growing linkage between real estate and financial markets in the City. Using current and historical data, patterns of ownership in the City are investigated. They reveal that overseas ownership has grown markedly since 1985, that owners are predominantly FIRE-sector firms and that there are strong links between ownership and occupation. This raises concerns about future volatility and systemic risk in a market strongly influenced by the cyclical behaviour and shocks of the international financial system.

International investment, ownership and risk in the City of London office market: an analysis of trends 1972-1997

Office returns in the City of London are more volatile than in other UK markets. This volatility may reflect fluctuations in capital flows associated with changing patterns of ownership and the growing linkage between real estate and financial markets in the City. Using current and historical data, patterns of ownership in the City are investigated. They reveal that overseas ownership has grown markedly since 1985, that owners are predominantly FIRE sector firms and that there are strong links between ownership and occupation. This raises concerns about future volatility and systemic risk.

The potential inefficiency of using marketing margins in applied commodity price analysis, forecasting and risk management

This paper examines the implications of using marketing margins in applied commodity price analysis. The marketing-margin concept has a long and distinguished history, but it has caused considerable controversy. This is particularly the case in the context of analyzing the distribution of research gains in multi-stage production systems. We derive optimal tax schemes for raising revenues to finance research and promotion in a downstream market, derive the rules for efficient allocation of the funds, and compare the rules with an without the marketing-margin assumption. Applying the methodology to quarterly time series on the Australian beef-cattle sector and, with several caveats, we conclude that, during the period 1978:2 - 1988:4, the Australian Meat and Livestock Corporation optimally allocated research resources.

Association between sucrose intake and risk of overweight and obesity in a prospective sub-cohort of EPIC-Norfolk

Objective: The objective of this study was to investigate associations between sugar intake and overweight using dietary biomarkers in the Norfolk cohort of the European Prospective Investigation into Cancer and Nutrition (EPIC-Norfolk). Design: Prospective cohort study Setting: European Prospective Investigation into Cancer in Norfolk (EPIC-Norfolk) in the UK, recruitment between 1993 and 1997. Subjects: 1734 participants (39 – 77 years). Sucrose intake was assessed using 7-day diaries. Baseline spot urine samples were analysed for sucrose by GC-MS. Sucrose concentration adjusted by specific gravity was used as biomarker for intake. Regression analyses were used to investigate associations between sucrose intake and risk of BMI > 25 kg/m2 after three years of follow-up. Results: After three years of follow-up, mean BMI was 26.8 kg/m2. Self-reported sucrose intake was significantly positively associated with biomarker. Associations between biomarker and BMI were positive (β=0.25; 95% CI: 0.08; 0.43), while they were inverse when using self-reported dietary data (β=-1.40; 95% CI: -1.81; -0.99). Age- and sex-adjusted OR for BMI > 25 kg/m2 in participants in the fifth vs. first quintile was 1.54 (95% CI: 1.12; 2.12; pTrend=0.003,) when using biomarker and 0.56 (95% CI: 0.40; 0.77; pTrend<0.001) with self-reported dietary data. Conclusions: Our results suggest that sucrose measured by objective biomarker but not self-reported sucrose intake is positively associated with body mass index. Future studies should consider use of objective biomarkers of sucrose intake.

Science for Humanitarian Emergencies and Resilience (SHEAR) scoping study: Annex 3 - Early warning system and risk assessment case studies

This report provides case studies of Early Warning Systems (EWSs) and risk assessments encompassing three main hazard types: drought; flood and cyclone. The case studies are taken from ten countries across three continents (focusing on Africa, South Asia and the Caribbean). The case studies have been developed to assist the UK Department for International Development (DFID) to prioritise areas for Early Warning System (EWS) related research under their ‘Science for Humanitarian Emergencies and Resilience’ (SHEAR) programme. The aim of these case studies is to ensure that DFID SHEAR research is informed by the views of Non-Governmental Organisations (NGOs) and communities engaged with Early Warning Systems and risk assessments (including community-based Early Warning Systems). The case studies highlight a number of challenges facing Early Warning Systems (EWSs). These challenges relate to financing; integration; responsibilities; community interpretation; politics; dissemination; accuracy; capacity and focus. The case studies summarise a number of priority areas for EWS related research: • Priority 1: Contextualising and localising early warning information • Priority 2: Climate proofing current EWSs • Priority 3: How best to sustain effective EWSs between hazard events? • Priority 4: Optimising the dissemination of risk and warning information • Priority 5: Governance and financing of EWSs • Priority 6: How to support EWSs under challenging circumstances • Priority 7: Improving EWSs through monitoring and evaluating the impact and effectiveness of those systems

Interactive effect of cowpea variety, dose and exposure time on bruchid tolerance to botanical pesticides

Callosobruchus maculatus has for years remained a serious menace in cowpea in Sub-Sahara Africa. The objective of this study was to investigate the effect of genotypic cowpea (Vigna unguiculata (L.) Walp) varieties, time and dose on C. maculatus exposed to powders of Piper guineense and Eugenia aromatica. Irrespective of duration and botanicals, bruchid reared on KDV showed the highest tolerance to both plant materials; while their counterparts from IAR48V were the most susceptible. Median lethal time (LT50) also varied according to the plant materials; with the highest in KDV reared bruchid [P. guineense: KDV (18.31), IAR48V (9.27), IFBV (13.17); E. aromatica: KDV (76.01), IAR48V (5.59), IFBV (6.49)]. There was a significant impact of cowpea variety (V), exposure time (T) and dose (D) on the tolerance of C. maculatus to both plant materials. The effect of all two-way (VxT, VxD, DxT) and three way interactions (V×T×D) on the tolerance of C. maculatus to both plant materials was also significant. Varietal effect was more pronounced in bruchids exposed to E. aromatica; while exposure time was more pronounced in bruchids exposed to P. guineense.