This paper examines the peifonnance of momentum trading strategies in foreign enchange markets. We find the well-documented profitability of momentum strategies during the 1970s and the 1980s has continued throughout the 1990s. Our ap(soach and findings are insensitive to die specification of the trading nile and the hase currency for analysis. Finally, we show that the peifonnance is not due to a time-vaiying risk premium hut rather depends on the underlying autocorrelation structure of the currency returns. In sum, the results lend fimher supprat to prior momentum studies on equities. The profitability to momentum-based strategies holds for currencies as well.
An alternative approach to test whether the real estate and stock markets are cointegrated is presented. A nonlinear test, which allows for a stochastic trend term as opposed to a deterministic drift term, is developed. The results of the nonlinear model are compared to the results obtained using conventional cointegration tests. The cointegration results support the view that the real estate and stock markets are segmented, whereas the nonlinear model supports the view that the markets are fractionally integrated. There is a nonlinear relationship between the stock and real estate markets, but movement of the real estate market towards the stock market is slow and divergence between the two markets can be prolonged. Copyright American Real Estate and Urban Economics Association.
Segmentation inproperty markets 79 internationally. Finally, the following section constructs an efficient frontier of internationally held property assets and then some conclusions are presented. Portfolio diversification Domestic property/equity diversificationTraditionally, portfolio managers have held between 5 and 20 per cent of their investments in real estate. However there is a growing body of literature on the question of whether a portfolio should contain both equity and real estate investments. Research evidence mostly favours the notion that real estate and equity markets are segmented, although there are a number of uncertainties surrounding this. For instance Grissom et al. (1987) along with Kuhle (1987), using a conventional mean/variance approach, found real estate diversification to be an effective means of risk reduction. On the other hand Liu et al. (1990) investigated the extent to which commercial real estate markets are segmented from capital markets in the context of a capital assets pricing model. These authors found conflicting evidence on whether commercial real estate and equity markets are segmented -the results of their analysis was contingent on whether real estate returns were computed from appraised values or from imputed sales values. Equity and real estate markets were found to be segmented when appraisal-based data was used in the analysis, but the markets were found to be integrated when REIT (real estate investment trust) data was used in place of appraisal-based data. Miles et al. (1990), using a transactions-based index to compare real estate risk return characteristics to other assets, found evidence to suggest that the real estate and equity markets were integrated. In contrast to this Geltner (1990), in a study that examined the part of an asset's return that does not reflect rational fundamental valuation, found that real estate and equity markets were segmented.More recently, in a study within the US property market, Myer and Webb (1993) examined the relationship between securitized and unsecuritized investments in real estate. These authors found that, in a distributional sense, securitized real estate returns appeared to be much more like the returns on common stock than on unsecuritized real estate, implying at least some degree of integration between the securitized real estate and common stock markets. Later research by these authors offered further support for this finding. In a study on the relationship between securitized retail real estate returns and retail common stock returns in the US Myer and Webb (1994) found that, after controlling for general stock market returns, there was evidence of a positive relationship between retail stocks and securitized retail real estate. Ong (1994), using a vector autoregression (VAR) approach to modelling real estate and property stock prices within the Singapore property market, found evidence to suggest that there exists a contemporaneous long-term relationship between the Singapore property stock price index, a Singapore...
Understanding cyclical activity is an important component of efficient portfolio management. Property appraisal models that do not explicitly take into account cyclical fluctuations may produce unrealistic valuation estimates resulting in property assets being incorrectly added to or removed from the general investment portfolio. In this paper we use conventional spectral analysis techniques to examine property and financial assets for evidence of cycles and co‐cycles. One finding is that the very pronounced cyclical patterns that appear in direct real estate markets and the economy as a whole are very much less obvious once they have filtered through to securitised property markets and financial assets markets.
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