International diversification with securitized real estate and the veiling glare from currency risk


Kroencke, Tim A. ; Schindler, Felix


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URL: https://ub-madoc.bib.uni-mannheim.de/3140
URN: urn:nbn:de:bsz:180-madoc-31406
Document Type: Working paper
Year of publication: 2011
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G11 G12 G15 ,
Subject headings (SWD): Immobilienweltmarkt , Minimum-Varianz-Portfolio , Diversifikation
Keywords (English): Diversification benefits , international mixed-asset portfolios , currency hedging , spanning tests , short selling constraints
Abstract: This paper analyzes diversification benefits from international securitized real estate in a mixed-asset context. We apply regression-based mean-variance efficiency tests, conditional on currency-unhedged and fully hedged portfolios to account for foreign exchange risk exposure. From the perspective of a US investor, it is shown that first, international diversification is superior to a US mixed-asset portfolio, second, adding international real estate to an already internationally diversified stock and bond portfolio results in a further significant improvement of the risk-return trade-off and, third, considering unhedged international assets could lead to biased asset allocation decisions not realizing the true diversification benefits from international assets. Our in-sample results are quite robust in out-of-sample analysis and when investment frictions like short selling constraints are introduced.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Kroencke, Tim A. ; Schindler, Felix (2011) International diversification with securitized real estate and the veiling glare from currency risk. Open Access [Working paper]
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