Abstract
This study considers the impact of adding real estate investment trust (REIT) stocks to stock portfolios in varying proportions under different economic conditions. To the extent real estate offers diversification benefits to stock market investors, REITs may serve as a practical alterative to the relatively high trading costs of direct equity positions in real estate investments. The results suggest that the inclusion of securitized real estate enhances portfolio performance during positive economic climates, but diminishes portfolio performance during negative economic climates.