| Nowadays, real estate industry has become our country's new increasing point of economy development. With the success of joining WTO, Beijing's Olympic game, Shanghai's world's fair, this industry will obtain more opportunity and face more challenge. How to control risk and gain more returns rationally is the first problem of our real estate developers. This dissertation applies portfolio theories to real estate investment in order to evaluate the feasibility of this application in the developing counties such as China. Firstly, portfolio theories are introduced, including the definition of return and risk, Markowitz model, Capital Assets Pricing Model, Arbitrage Pricing Theory, Single Index Model and Multi-index Model. Secondly, according to portfolio theories, real estate investment risks are classified into systematic risks and non-systematic risks. Two methods, geographic diversification and property-tape diversification, are analyzed in details. Thirdly, applying portfolio theories into real estate investment, the basic return-risk model and single index return-risk model are presented. The general solution of the models is also given. Finally, evidential analysis is done by using Tianjin real estate market data. Efficient frontier is got by using statistics software SAS and investment strategy is gained based on the result.Real estate portfolio model in this dissertation is a scientific and advanced investment method and is the trend of future real estate investment strategy. This model has great theoretical and practical significance for real estate developers to control the risk.
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