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Paper eres2011_151:
Alternative investments: return driving actors

id eres2011_151
authors Elliott, Keith; Marcato, Gianluca
year 2011
title Alternative investments: return driving actors
source 18th Annual European Real Estate Society Conference in Eindhoven, the Netherlands
summary In an asset allocation process, correlations are particularly important if one includes 'alternative investments' such as real estate, commodities and hedge funds, which have been proclaimed to provide diversifying benefits within the overall portfolio context. However, by looking at correlations between asset classes alone some diversification benefits may be over or under-stated. More recently, finance literature has focused on alternative asset classes to study their behaviour and to identify the main driving factors. Particularly, these studies have tried to shed light upon the cyclical behaviour of these ‘new’ assets and their link with overall economic trends. This paper represents the first comparative study of several asset classes. We analyse the common driving factors of fourteen (both traditional and alternative) assets to provide insights into their likely performance over different economic environments. Firstly, Principle Component Analysis is used to give a better statistical understanding of the structure of the data and the number of likely common factors. Subsequently, a number of different univariate and multivariate regressions are performed using financial and economic variables identified in the literature. We find evidence of common macroeconomic and financial factors driving the returns of certain asset classes, with consequences on the reduced diversification benefits of such assets during particular phases of the business cycle.
series ERES:conference
email k.e.w.elliott@reading.ac.uk
content file.pdf (806,837 bytes)
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ratings
session D1: Finance & Investment (IV), Risk & Portfollio Management
last changed 2014/10/21 21:51
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