Allocation

Allocation This paper re-examines the issue of international diversification in real estate securities and attempts to address the problem of estimation error in the inputted parameters through the use of two alternative techniques. The Bayes-Stein approach advocated by studies such as Jorion (1985) is used in additional to a simple minimum variance strategy. The results see an increased stability in calculated portfolio allocations in comparison to the classical mean-variance tangency approach, and see significant improvements in ex-post performance. In addition, the minimum variance portfolio significantly outperformed a naive equally weighted strategy ex-post