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Searching for a listed infrastructure asset class using mean–variance spanning

Author

Listed:
  • Frédéric Blanc-Brude

    (EDHEC Infrastructure Institute-Singapore)

  • Timothy Whittaker

    (EDHEC Infrastructure Institute-Singapore)

  • Simon Wilde

    (University of Bath)

Abstract

This study examines the portfolio-diversification benefits of listed infrastructure stocks. We employ three different definitions of listed infrastructure and tests of mean–variance spanning. The evidence shows that viewing infrastructure as an asset class is misguided. We employ different schemes of infrastructure asset selection (both traditional asset classes and factor exposures) and discover that they do not provide portfolio-diversification benefits to existing asset allocation choices. We also find that defining and selecting infrastructure investments by business model as opposed to industrial sectors can reveal a very different investment profile, albeit one that improves the mean–variance efficient frontier since the global financial crisis. This study provides new insights into defining and benchmarking infrastructure equity investments in general, as well as into the extent to which public markets can be used to proxy the risk-adjusted performance of privately held infrastructure investments.

Suggested Citation

  • Frédéric Blanc-Brude & Timothy Whittaker & Simon Wilde, 2017. "Searching for a listed infrastructure asset class using mean–variance spanning," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(2), pages 137-179, May.
    • Handle: RePEc:kap:fmktpm:v:31:y:2017:i:2:d:10.1007_s11408-017-0286-z
    DOI: 10.1007/s11408-017-0286-z
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    References listed on IDEAS

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    Cited by:

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    4. Karl Demers-Bélanger & Van Son Lai, 2019. "Diversification Benefits of Cat Bonds: An In-Depth Examination," Working Papers 2019-008, Department of Research, Ipag Business School.
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    More about this item

    Keywords

    Infrastructure investment; Mean–variance spanning; Asset allocation; Benchmarking;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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