Measuring the Significance of Diversification Gains
Year: 1998
Type: article
Abstract: This article investigates whether investing in alternative investment media provides statistically significant increases in portfolio performance. Employing methodology introduced by Kandel and Stambaugh (1987) and Gibbons, Ross and Shanken (1989), we measure the statistical significance of diversification gains for portfolios containing real and financial domestic assets, as well as international debt and equity issues. The NCREIF real estate series is further examined using the Geltner (1993) adjustment to the risk measure. In the 1978-93 sample period, neither international assets nor unadjusted real estate ever result in statistically significant increases in portfolio performance. When the Geltner adjustment is made, the allocation to real estate is substantially reduced in the expanded portfolio and also fails to result in a statistically significant increase in portfolio performance. These results may help to resolve the paradox between current portfolio allocations to real estate in practice and those suggested in the literature.
Source: Journal of Real Estate Research
Authors: Jack Rubens, David Louton, Elizabeth Yobaccio
Institution: Bryant University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1579646623