Using Investor Utility to Determine Portfolio Choice with REITs

Document Type

Conference Proceeding

Publication Date



This paper examines the decision of individual investors to allocate a portion of their existing investment portfolios to REITs. It first derives the risk preferences of investors represented by their benchmark portfolios of stocks and bonds. Such risk preferences are then used for portfolio decisions regarding REITs. The analysis shows that investors with lower risk aversion tend to have a more substantial stock component in their benchmark portfolio and will obtain higher risk-return benefits from adding REITs. In addition to the theoretical analysis, the paper provides a practical solution to evaluate the benefit of investing in REITs.


Academy of Financial Services Annual Meeting


College of Business and Management