Are Home-biased REITs Worthwhile?

Executive SummaryDue to the unique features of each real estate investment opportunity, real estate investment trust (REIT) asset managers generally prefer to focus on domestic investments, for which they have more available information. While there is evidence of this trend in the U.S. market, there is little evidence in the rest of the world. In this paper, we examine a sample of geographically diversified REITs, focusing on the degree of home bias in different countries and compare the extra performance achieved by home-biased and non-home-biased REITs. The results show that home bias is more significant for certain countries and geographical areas and that home country portfolio concentration does not always imply higher average returns or a higher probability of return persistence.