Investing in Mixed Asset Portfolios: the Ex-Post Performance

Carolina Fugazza (), Massimo Guidolin and Giovanna Nicodano

No 69, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: We calculate the ex-post portfolio performance for an investor who diversifies among stocks, bonds, REITS and cash. Simulations are performed for two alternative asset allocation frameworks – classical and Bayesian - and for scenarios involving two different samples and six different investment horizons. Interestingly, the ex-post welfare cost of restricting portfolio choices to traditional financial assets only is found to be positive in all scenarios for a Bayesian investor. On the contrary, substitution of E-REITS for stocks in optimal portfolios turns out to reduce ex-post portfolio performance over the nineties for a Classical investor.

Keywords: optimal asset allocation; real estate; parameter uncertainty; out-of-sample performance (search for similar items in EconPapers)
JEL-codes: G11 L85 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-11
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:crp:wpaper:69

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