[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/taf/jpropr/v30y2013i4p266-297.html
   My bibliography  Save this article

Diversification of portfolio risk: reconciling theory and observed weightings

Author

Listed:
  • Cath Jackson
Abstract
During the 1990s and early 2000s an international body of literature explored property portfolio diversification strategies, motivated by the view that reliance on administrative regions to represent asset classes is suboptimum because they are based on historic and governmental factors rather than market fundamentals. Thus, individual 'asset classes' may contain highly heterogeneous areas, violating the basic tenets of investment theory. Asset classes based on alternative market groupings were proposed and are re-evaluated here. A sample of 73 local markets is analysed covering 1998--2007, with temporal stability additionally explored. Comparative portfolio performance opportunities are assessed using efficient frontiers, with the alternative market groupings most often found to offer superior performance to traditional strategies. Further than this, the optimal weightings suggested by the classifications are compared to observed aggregate institutional investment weightings. The differences in allocation are found to be considerable. Subsequent hypothetical benchmark portfolios, constructed using observed allocations, are found to statistically significantly violate the mean variance criterion in volatile market phases. Explanations are proposed, drawing on the investment characteristics of property and consequences for portfolio management, as well as an exploration of behavioural factors to include benchmarking. A re-visiting of investment theory and practical strategies is urged.

Suggested Citation

  • Cath Jackson, 2013. "Diversification of portfolio risk: reconciling theory and observed weightings," Journal of Property Research, Taylor & Francis Journals, vol. 30(4), pages 266-297, December.
    • Handle: RePEc:taf:jpropr:v:30:y:2013:i:4:p:266-297
    DOI: 10.1080/09599916.2013.813578
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09599916.2013.813578
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09599916.2013.813578?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jpropr:v:30:y:2013:i:4:p:266-297. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RJPR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.