The Stability of the Covariances of International Property Share Returns
This paper looks at the covariance structure of international property share returns. Portfolio models, which are used to generate efficient international asset allocations, require estimates of a covariance structure of asset returns as input. Usually, the realized structure is used as a proxy, but that is only valid if this structure is stable. We test for this stability. We find covariances of international property share returns to be unstable, while correlations are stable between some time-periods, and unstable between others. The results cast some doubts on the use of standard portfolio models for the allocation of international real estate portfolios.
Volume (Year): 11 (1996)
Issue (Month): 2 ()
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- Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-75, September.
- Charles Engel & Anthony P. Rodrigues, 1987.
"Tests of International CAPM with Time-Varying Covariances,"
NBER Working Papers
2303, National Bureau of Economic Research, Inc.
- Engel, Charles & Rodrigues, Anthony P, 1989. "Tests of International CAPM with Time-Varying Covariances," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(2), pages 119-38, April-Jun.
- Glenn R. Mueller, 1993. "Refining Economic Diversification Strategies for Real Estate Portfolios," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 55-68.
- Kaplanis, Evi C., 1988. "Stability and forecasting of the comovement measures of international stock market returns," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 63-75, March.
- Joseph Gyourko & Donald B. Keim, . "What Does the Stock Market Tell Us About Real Estate Returns? (Revision of 18-91) (Reprint 030)," Rodney L. White Center for Financial Research Working Papers 11-92, Wharton School Rodney L. White Center for Financial Research.
- David J. Hartzell & David G. Shulma & Vice President, 1987. "Refining the Analysis of Regional Diversification for Income-Producing Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 85-95.
- Joseph Gyourko & Donald B. Keim, 1992. "What Does the Stock Market Tell Us About Real Estate Returns?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(3), pages 457-485.
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