Global Property Market Diversification

被引:0
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作者
John G. Gallo
Ying Zhang
机构
[1] University of Iowa,Department of Finance, Tippie College of Business
[2] Monmouth University,Department of Economics, Finance, and Real Estate
关键词
Diversification; Real Estate; Global; Portfolio; Cointegration;
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摘要
This paper examines global diversification benefits provided by developed property markets over 1992–2007. We employ a cointegration methodology, invariant to pair-wise correlational instability plaguing MPT approaches, to investigate regional and country property market diversification benefits for U.S. domiciled global real estate investors. We show, theoretically and empirically, the cointegration procedure aptly identifies markets integrated by common trends that mitigate diversification potential. We show global property markets are interregionally independent but find intraregional market cointegration. A portfolio of markets independent of cointegrating relationships performs best during the period but is insufficiently diversified relative to a cointegrated portfolio. Independent country markets do account for the bulk of global property diversification gains but cointegrated markets, particularly from the North American and Asia Pacific regions, retain some diversifying qualities. We also show cointegrated markets converge toward benchmark characteristics, reducing their attraction as portfolio candidates.
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页码:458 / 485
页数:27
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