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The Effect of Alternative Return Measures on Restricted Mixed‐Asset Portfolios

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  • James R. Webb
  • Jack H. Rubens

Abstract

A restricted portfolio is constructed which includes NYSE common stocks, corporate bonds, government bonds, small capitalization common stocks, residential real estate and farmland and returns for each of four different tax brackets (0%, 15%, 30%, 45%). Next, three alternative measures of rates of return for residential real estate and farmland are used. Finally, since some researchers believe that standard risk measures (variance and standard deviation) do not capture the total risk in real estate, the risk for the real estate returns is increased five times while the returns are held constant. The twenty–four optimal portfolios (four tax brackets with two measures of risk and three measure of return for residential real estate and farmland) are then derived. These results are then compared and contrasted to each other to ascertain the change in sensitivity of the optimal portfolios due to different tax rates, different rates–of–return estimates and different risk estimates.

Suggested Citation

  • James R. Webb & Jack H. Rubens, 1988. "The Effect of Alternative Return Measures on Restricted Mixed‐Asset Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(2), pages 123-137, June.
    • Handle: RePEc:bla:reesec:v:16:y:1988:i:2:p:123-137
    DOI: 10.1111/1540-6229.00450
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    1. Stam, Jerome M. & Koenig, Steven R. & Wallace, George B., 1995. "Life Insurance Company Mortgage Lending to U.S. Agriculture: Challenges and Opportunities," Agricultural Economic Reports 308429, United States Department of Agriculture, Economic Research Service.
    2. Waggle, Doug & Johnson, Don T., 2009. "An analysis of the impact of timberland, farmland and commercial real estate in the asset allocation decisions of institutional investors," Review of Financial Economics, Elsevier, vol. 18(2), pages 90-96, April.
    3. Doug Waggle & Don T. Johnson, 2009. "An analysis of the impact of timberland, farmland and commercial real estate in the asset allocation decisions of institutional investors," Review of Financial Economics, John Wiley & Sons, vol. 18(2), pages 90-96, April.
    4. Williams, John & McSweeney, Peter & Salmon, Robert, 2014. "Australian Farm Investment: Domestic and Overseas Issues," Papers 234408, University of Melbourne, Melbourne School of Land and Environment.
    5. Johnson, Michael & Malcolm, Bill & O'Connor, Ian, 2006. "The Role of Agribusiness Assets in Investment Portfolios," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 14.
    6. Mark A. Sunderman & Ronald W. Spahr & John W. Birch & Russell M. Oster, 2000. "Impact of Ranch and Market Factors on an Index of Agricultural Holding Period Returns," Journal of Real Estate Research, American Real Estate Society, vol. 19(2), pages 209-234.
    7. Allen, Pamela & McConnell, Kenneth E., 1991. "Explaining Risk in Asset Markets: A Varying Parameters Approach," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271159, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Kim, k. & Suh, s. & Feridun, M., 2006. "Real State Business Cycle and Real Estate Policies: The Case of Korea," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(1).

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