International diversification with securitized real estate and the veiling glare from currency risk
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Authors
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Publication date
11/2012
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01A - Journal article
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Parent work
Journal of International Money and Finance
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Volume
31
Issue / Number
7
Pages / Duration
1851-1866
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Publisher / Publishing institution
Elsevier
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Abstract
This paper analyzes diversification benefits from international securitized real estate in a mixed-asset context. We apply regression-based mean-variance efficiency tests, conditional on currency-unhedged and fully hedged portfolios to account for systematic foreign exchange movements. From the perspective of a US investor, it is shown that, first, international diversification is superior to a US mixed-asset portfolio, second, adding international real estate to an already internationally diversified stock and bond portfolio results in a further significant improvement of the risk-return trade-off and, third, considering unhedged international assets could lead to biased asset allocation decisions not realizing the true diversification benefits from international assets.
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ISBN
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0261-5606
Language
English
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No
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Publication status
Published
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Closed
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Citation
Kröncke, T., & Schindler, F. (2012). International diversification with securitized real estate and the veiling glare from currency risk. Journal of International Money and Finance, 31(7), 1851–1866. https://doi.org/10.1016/j.jimonfin.2012.05.018