According to the CFAI book, REIT has more diversification benefits than MBS. I dont understand why this would be the case-any explanation for this?
I think REITs can have many types of mortgages such as commercial, industrial and residentials that are used to generate income to be passthrough as dividends. Where as MBS uses only residental agency loans, so only one type of property is used.
So the value of the underlying of a reit can be spread through many types of properties, while mbs is only has the residential sector in the underlying.