Comparing Downside-Risk and Mean-Variance Analysis Using Bootstrap Simulation

Ping Cheng

Journal of Real Estate Portfolio Management, 2001, vol. 7, issue 3, 225-238

Abstract: Executive Summary. Is Downside risk (DR) a better alternative to the traditional mean-variance analysis (MV) for real estate portfolio diversification? This study demonstrates a bootstrap approach for comparing the two models. The results show that ex ante DR portfolio return distributions tend to be negatively skewed with a smaller left tail, and median returns seem to be higher than that of MV portfolios. Also, the DR model suggests the weight of real estate in a mixed-asset portfolio is similar to the practice of institutional investors. The results imply that portfolios formed with DR approach have certain desirable properties unavailable to MV portfolios.

Date: 2001
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DOI: 10.1080/10835547.2001.12089642

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