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Real estate ETNs in strategic asset allocation

Author

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  • Sebastian, Steffen P.

    (University of Regensburg, Germany)

  • Steininger, Bertram I.

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

Previous research has shown that real estate serves as a diversifier in mixed-asset portfolios. However, this empirical funding is beset with some drawbacks associated with direct real estate investment. In order to overcome some of these drawbacks, we use theoretical real estate exchange traded notes (ETNs) in a mean-shortfall setting to optimize an international mixed-asset portfolio. In addition, the typical long-only strategy is abandoned in favor of a 130/30 long-short and an exchange rate hedge strategy. Not only in-sample but also out-of-sample portfolios yield significant diversification benefits by means of real estate ETNs in different portfolio strategies.

Suggested Citation

  • Sebastian, Steffen P. & Steininger, Bertram I., 2021. "Real estate ETNs in strategic asset allocation," Working Paper Series 21/8, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2021_008
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    References listed on IDEAS

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    More about this item

    Keywords

    real estate derivatives; exchange traded notes; asset allocation; mixed-asset portfolio;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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