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Investing in Mixed Asset Portfolios: the Ex-Post Performance

Author

Listed:
  • Carolina Fugazza

    () (CeRP-Collegio Carlo Alberto, Turin)

  • Massimo Guidolin

    () (Manchester Business School and CeRP-Collegio Carlo Alberto, Turin)

  • Giovanna Nicodano

    () (University of Turin and CeRP-Collegio Carlo Alberto, Turin)

Abstract

We calculate the ex-post portfolio performance for an investor who diversifies among stocks, bonds, REITS and cash. Simulations are performed for two alternative asset allocation frameworks – classical and Bayesian - and for scenarios involving two different samples and six different investment horizons. Interestingly, the ex-post welfare cost of restricting portfolio choices to traditional financial assets only is found to be positive in all scenarios for a Bayesian investor. On the contrary, substitution of E-REITS for stocks in optimal portfolios turns out to reduce ex-post portfolio performance over the nineties for a Classical investor.

Suggested Citation

  • Carolina Fugazza & Massimo Guidolin & Giovanna Nicodano, 2007. "Investing in Mixed Asset Portfolios: the Ex-Post Performance," CeRP Working Papers 69, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  • Handle: RePEc:crp:wpaper:69
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    More about this item

    Keywords

    optimal asset allocation; real estate; parameter uncertainty; out-of-sample performance;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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