I am working on optimising a real estate portfolio.
I have a total returns series for various property types and locations.
I am comfortable with my expected returns estimates, but I have significant concerns with the estimates on risk. The series is more of a market average, which provides a false sense of security as to how volatile the asset is. Also, the historical data is often patchy and looking at volatility alone does not provide sensible results.
I have been reading around but haven't had much luck here.
Are there methods to help me to choose my own risk measures? I would like to add penalties for certain asset classes and locations which clearly aren't being penalised enough in my current models.
I have been working on this in R.