Scandinavian Working Papers in Economics
Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance
No 21/8: Real estate ETNs in strategic asset allocation
Steffen P. Sebastian () and Bertram I. Steininger ()
Additional contact information
Steffen P. Sebastian: University of Regensburg, Germany
Bertram I. Steininger: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Teknikringen 10B, 100 44 Stockholm, Sweden
Abstract: Previous research has shown that real estate serves as a diversifier in mixed-asset portfolios. However, this empirical funding is beset with some drawbacks associated with direct real estate investment. In order to overcome some of these drawbacks, we use theoretical real estate exchange traded notes (ETNs) in a mean-shortfall setting to optimize an international mixed-asset portfolio. In addition, the typical long-only strategy is abandoned in favor of a 130/30 long-short and an exchange rate hedge strategy. Not only in-sample but also out-of-sample portfolios yield significant diversification benefits by means of real estate ETNs in different portfolio strategies.
Keywords: real estate derivatives; exchange traded notes; asset allocation; mixed-asset portfolio
JEL-codes: G11; G13; G15; G19; G20; R30
26 pages, December 2, 2021
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