Downside risk optimization in securitized real estate markets


Kroencke, Tim A. ; Schindler, Felix


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URL: https://ub-madoc.bib.uni-mannheim.de/2956
URN: urn:nbn:de:bsz:180-madoc-29560
Dokumenttyp: Arbeitspapier
Erscheinungsjahr: 2010
Sprache der Veröffentlichung: Englisch
Einrichtung: Sonstige Einrichtungen > Zentrum für Europ. Wirtschaftsforschung (ZEW)
MADOC-Schriftenreihe: Veröffentlichungen des ZEW (Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Fachgebiet: 330 Wirtschaft
Fachklassifikation: JEL: G15 C61 G11 ,
Normierte Schlagwörter (SWD): Portfoliomanagement , Value at Risk , Immobilienmarkt , Securitization , Hypothek , Schätzung , Industriestaaten
Freie Schlagwörter (Englisch): Downside Risk Analysis , International Real Estate Markets , Portfolio Management , Portfolio Optimization , Out-of-Sample Analysis
Abstract: Optimization of international securitized real estate portfolios has been a key topic for several decades. However, most previous analysis has focused on regional diversification by applying the traditional mean-variance (MV) framework suggested by Markowitz (1952) even if the limitations of this approach are well-known. Thus, we focus on a more suitable and appealing downside risk (DR) framework suggested by Estrada (2008), which applies a similar optimization algorithm as the MV framework. The analysis covers the eight largest securitized real estate markets from January 1990 to December 2009 and thus captures a more global perspective. The main findings are as follows: first, the return distributions are non-normally distributed and negatively skewed. Second, optimal portfolio weights differ substantially between the MV and DR approach. Third, portfolio weights are shifted from the U.S. and Australian market to the Dutch and the French market when applying the DR framework instead of the MV framework. Fourth, the dominance of the DR framework is well-documented by comparing out-of-sample performance. The empirical results are remarkable and emphasize the practical merit of the presented DR framework for investors and portfolio managers.
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Kroencke, Tim A. ; Schindler, Felix (2010) Downside risk optimization in securitized real estate markets. Open Access [Arbeitspapier]
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