Problem $5[20$ points$]$

$1.$ What is the long$-$standing real estate risk premium puzzle? What is the real estate mixed

assets allocation puzzle? Do these puzzles really exist? Discuss the causes of these

puzzles.

$2.$ Below are Sharpe ratios for both the financial and real estate markets. Briefly discuss

their difference and explain why the real estate should have its own Sharpe ratio.

$3.$ Cheng, Lin and Liu $(2017-$JRER$)$ develop the mixed$-$asset portfolio by extending the

Modern Portfolio Theory $($MPT$)$ as follows,

Briefly discuss the difference between these two models and explain why the real estate

should have its own asset allocation model.