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Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches

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  • Thomas C. Chiang

    () (Department of Finance, LeBow College of Business, Drexel University, 32nd and Chestnut Streets, Philadelphia, PA 19104 USA)

  • Hooi Hooi Lean

    () (School of Social Sciences, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia)

  • Wing-Keung Wong

    () (Department of Economics, Hong Kong Baptist University, Kowloon Tong, Hong Kong)

Abstract

This paper re-examines the performance of REITs, stocks, and fixed-income assets based on the preferences of risk-averse and risk-seeking investors using mean-variance and stochastic dominance approaches. Our findings indicate no first-order stochastic dominance and no arbitrage opportunity among these assets. However, our stochastic dominance results reveal that in order to maximize their expected utility, the risk-averse prefer fixed-income assets over real estate, which, in turn, is preferable to stocks. On the other hand, to maximize their expected utility, all risk-seeking investors would prefer to invest in stocks than in real estate, but real estate, in turn, is preferable to fixed-income assets.

Suggested Citation

  • Thomas C. Chiang & Hooi Hooi Lean & Wing-Keung Wong, 2008. "Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 1(1), pages 1-40, December.
  • Handle: RePEc:gam:jjrfmx:v:1:y:2008:i:1:p:1-40:d:28255
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    Cited by:

    1. Alghalith, Moawia & Niu, Cuizhen & Wong, Wing-Keung, 2017. "The impacts of joint energy and output prices uncertainties in a mean-variance framework," MPRA Paper 79739, University Library of Munich, Germany.

    More about this item

    Keywords

    stochastic dominance; risk; REITs; stock; fixed-income assets; risk-aversion; risk-seeking;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • E - Macroeconomics and Monetary Economics
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • G - Financial Economics

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