Benefits of Global Diversification on a Real Estate Portfolio

Diversifying risk in portfolios using a variable‐size genetic relation algorithm

“…We can see from Fig. 13 that GRA reduces its volatility when the size is larger, which is consistent with other similar findings [3,5,8]. However, vs‐GRA obtains better returns than the standard GRA even if GRA increases its size to 500 assets.…”

“… First, due to over‐concentration and investor home‐bias issues, dealing with portfolio diversification systematically is hardly practiced in finance. It means concentrating on risk in a limited number of assets and being exposed to price fluctuations and behavioral responses of the investors' decision making [6,8]. Thus, it is vital to build robust systems that can handle the portfolio diversification systematically not only to protect investor interest but also to ensure the health of the economy. Second, recent studies have shown that the cost of accessing diversification is higher than its potential benefits, making it a selective practice in which only companies with high market value in developed financial markets have better access to diversification, which means better control of the risk inherent in their businesses' cash flows [6,7].…”

“…First, due to over‐concentration and investor home‐bias issues, dealing with portfolio diversification systematically is hardly practiced in finance. It means concentrating on risk in a limited number of assets and being exposed to price fluctuations and behavioral responses of the investors' decision making [6,8]. Thus, it is vital to build robust systems that can handle the portfolio diversification systematically not only to protect investor interest but also to ensure the health of the economy.…”

“…The scope for diversification defines which asset classes, which sectors, and which geography should be included in a portfolio of assets. Generally speaking, institutional investors define the scope for diversification using statistical analyses of historical data and models with strong mathematics [8]. For example, in a classical model, the full covariance or correlation matrix is taken into account, where optimizing a portfolio of assets with low mutual correlation, or low covariance, is the main goal [3].…”

Risk factor and industry effects in the cross-country comovement of momentum returns

“…This pattern is consistent with integrated equity markets across developed countries but not across emerging countries and is also consistent with the broader literature on the integration of global equity markets (e.g., Puchkov et al, 2005;Bekaert et al, 2002;Bekaert and Harvey, 1995 among others. ) The concentration of comovement among integrated markets observed here is also similar to that documented for other asset classes, for example: syndicated loans (Carey and Nini, 2007;Itzkowitz et al, 2008), bonds (Barr and Priestley, 2004), and real estate (Hastings and Nordby, 2007;Ling and Naranjo, 1999).…”