Diversification Benefits of U.S. REITs for Private Investors Holding Asian Stocks

Tan, Ying Hsuan and Lim, Siok Jin (2023): Diversification Benefits of U.S. REITs for Private Investors Holding Asian Stocks.

Abstract

This study endeavours to explore the potential diversification advantages stemming from the inclusion of United States Real Estate Investment Trusts (REITs) within investment portfolios heavily focused on Asian stock indices. Utilizing a robust framework comprising multivariate GARCH (Generalized Autoregressive Conditional Heteroskedasticity) modelling and comprehensive Wavelet Transform analyses, this research investigates the intricate dynamics between US REITs and key Asian stock markets spanning the period from 2018 to 2023. This research contributes comprehensive empirical evidence, indicating that despite inherent volatility, US REITs showcase relatively weaker correlations with individual Asian stock indices. This highlights the possibility of diversification benefits, rendering US REITs potentially independent of the movements witnessed in Asian stock indices, particularly during select temporal intervals. Moreover, this study yields crucial insights for investors, offering guidance for optimized portfolio allocations and risk management strategies within a constantly evolving global financial landscape. The findings underscore the significance of considering US REITs as potential diversification assets for portfolios containing Asian stocks.

• Item Type: MPRA Paper
• Language: English
• Keywords: Portfolio Diversification, Asian Stock Indices, United States REITs, Conditional Correlations, Maximum Overlap Discrete Wavelet Transform (MODWT), Continuous Wavelet Transform (CWT), Multivariate GARCH, Investment Analysis
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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