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Bayes-Stein Estimators and International Real Estate Asset Allocation

  • Simon Stevenson

    ()

    (University College Dublin, Blackrock, Ireland)

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    This article re-examines the issue of international diversification in real estate securities and attempts to address the problem of estimation error in the inputted parameters through the use of alternative techniques. The results see an increased stability in calculated portfolio allocations in comparison to the classical mean-variance tangency approach, and see significant improvements in out-of-sample performance. In addition, the minimum variance portfolio significantly outperforms a naive equally-weighted strategy. These results are also largely consistent when transaction costs are incorporated into the analysis.

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    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol21n0102/07.89_104.pdf
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    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 21 (2001)
    Issue (Month): 1/2 ()
    Pages: 89-104

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    Handle: RePEc:jre:issued:v:21:n:1/2:2001:p:89-104
    Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
    Web page: http://www.aresnet.org/
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    Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
    Web: http://pages.jh.edu/jrer/about/get.htm Email:


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    1. Anthony J. Richards, 1997. "Winner-Loser Reversals in National Stock Market Indices; Can they Be Explained?," IMF Working Papers 97/182, International Monetary Fund.
    2. Jorion, Philippe, 1986. "Bayes-Stein Estimation for Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(03), pages 279-292, September.
    3. Jorion, Philippe, 1985. "International Portfolio Diversification with Estimation Risk," The Journal of Business, University of Chicago Press, vol. 58(3), pages 259-78, July.
    4. Ronald Balvers & Yangru Wu & Erik Gilliland, 2000. "Mean Reversion across National Stock Markets and Parametric Contrarian Investment Strategies," Journal of Finance, American Finance Association, vol. 55(2), pages 745-772, 04.
    5. James M. Poterba & Lawrence H. Summers, 1987. "Mean Reversion in Stock Prices: Evidence and Implications," NBER Working Papers 2343, National Bureau of Economic Research, Inc.
    6. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
    7. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
    8. Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-52, September.
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