Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/48705
Authors: 
Schindler, Felix
Kröncke, Tim-Alexander
Year of Publication: 
2011
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft: Lektionen aus der Krise - Session: Financial Economics F6-V1
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.
Subjects: 
Diversification Benefits
International Mixed-Asset Portfolios
Currency Hedging
Spanning Tests
Short Selling Constraints
JEL: 
G12
G15
G11
Document Type: 
Conference Paper

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