Abstract:

This paper attempts to diversify stock-bond portfolios with commercial real estate by utilising a ten year (2006-2015) data retrieved from both the managers of five prime shopping malls in three major Nigerian cities and the Nigerian Stock Exchange (NSE). By the use of the standard deviation and Sharpe ratio, individual asset risk and returns were analysed using the Solver software on MS excel and asset allocations were made by varying returns and Sharpe ration at different instances. Findings showed that an inclusion of between 6.53% and 10.95% of direct commercial real estate in a mixed portfolio of ten stocks and bonds could yield an optimum of 70% and a maximum of 90% return over the study period. The study concludes that though, commercial real estate fails to fall within the efficiency frontier, its inclusion in stock-bond portfolios offered benefits for risk averse investors. The authors recommend the inclusion of CREs in the portfolios of risk averse investors only as its rate of returns do not suit the portfolios of risk lovers.