Diversification with Real Estate Stocks

W. Brent Lindquist, Svetlozar T. Rachev, Yuan Hu, Abootaleb Shirvani

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

Performance of optimized REIT portfolios under diversification via the addition of real estate stocks is considered in this chapter. Under both historical and dynamic optimization, adding the stocks significantly improves the price performance of minimum risk portfolios by reducing the value-at-risk of the portfolios. The reverse holds for the tangent portfolio optimizations, under which adding the stocks dramatically worsens the value-at-risk and consequently the price performance. The reward-to-risk performance measures of the diversified portfolios are compared to the undiversified counterparts. The results of diversification vary with the performance measure but are again generally better for the minimum risk portfolios than for tangent portfolios.

Original languageEnglish
Title of host publicationDynamic Modeling and Econometrics in Economics and Finance
PublisherSpringer Science and Business Media Deutschland GmbH
Pages131-136
Number of pages6
DOIs
StatePublished - 2022

Publication series

NameDynamic Modeling and Econometrics in Economics and Finance
Volume30
ISSN (Print)1566-0419
ISSN (Electronic)2363-8370

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