Time Variation in Diversification Benefits of Commodity, REITs, and TIPS

Price Discovery in Real Estate Markets: A Dynamic Analysis

“…Their overall result is that long run net asset discounts persist in the individual Asian-Pacific real estate markets. Huang and Zhong (2006) utilize the dynamic conditional correlation GARCH model to build a portfolio of seven asset classes-U.S. stocks, foreign stocks, U.S. bonds, foreign bonds, commodities, Treasury inflation-protected securities (TIPS), and U.S. REITs. They also utilize alternative correlation estimation methods, including the unconditional correlation, the rolling correlation, and the constant correlation.…”

“…Examples includePagliari et al (2005);Clayton and MacKinnon (2001a);Ling and Ryngaert (1997) andBarkham and Geltner (1995) 4 An application of the dynamic correlation multivariate GARC model to build an optimal portfolio can be found inCase et al (2008) andHuang and Zhong (2006) Case et al (2008). construct an optimal portfolio of RETis, stocks, bonds and cash while the portfolio ofHuang and Zhong (2006) consists of seven asset classes-U.S. stocks, foreign stocks, U.S. bonds, foreign bonds, commodities, Treasury inflation-protected securities (TIPS), and U.S. REITs…”

“…construct an optimal portfolio of RETis, stocks, bonds and cash while the portfolio ofHuang and Zhong (2006) consists of seven asset classes-U.S. stocks, foreign stocks, U.S. bonds, foreign bonds, commodities, Treasury inflation-protected securities (TIPS), and U.S. REITs…”

“…Two recent studies(Case et al 2008;Huang and Zhong 2006) show that an optimal portfolio based on the DCC model would outperform an optimal portfolio based on alternative models…”

Should investors include commodities in their portfolios after all? New evidence

“…Our approach takes care of these two points among its other purposes. 6 Huang and Zhong (2006), Nijman and Swinkels (2008), Scherer and He (2008) and Galvani and Plourde (2010) have also applied spanning techniques to assess the diversification benefits of investing in commodities. However, their analysis is placed under a MV setting.…”