Diversification benefit of Japanese real estate over the last four decades

This paper examines the benefits of diversifying into real estate and other assets that typify the wealth held by Japanese investors by examining movements in mean variance frontiers. We employ spanning tests to assess statistical significance of frontier shifts without specifying a benchmark asset pricing model. We also examine the impact of shifts in mean variance frontiers before and after the precipitous decline in Japanese real estate and stock market values in the 90s. Spanning tests show that real estate, short, and long-term bonds provide diversification benefits while domestic and US equities do not. Significant shifts in mean variance frontiers are detected during the 90s. Residential property as opposed to commercial and industrial properties proves to be a more robust diversifier. Statistically significant shifts are also economically significant as measured by Sharpe ratio changes. Although significant, the portfolio weights on real estate are small compared to their composition in nations 19 wealth

Incorporating Active Adjustment into a Financing Based Model of Capital Structure

The conventional partial adjustment model, which focuses on leverage evolution, has difficulty identifying deliberate capital structure adjustments as it confounds financing decisions with the mechanical autocorrelation of leverage. We propose and estimate a financing-based partial adjustment model that separates the effects of financing decisions on leverage evolution from mechanical evolution. The speed of adjustment (SOA) is firm specific and stochastic, and active targeting of capital structure has a multiplier effect that depends on the size of financial deficit. Overall, we find expected SOA from active rebalancing(30%) more than doubles what is expected from mechanical mean reversion alone (13%)

International Diversification with American Depository Receipts (ADRs);

It is already well known that U.S. investors can achieve higher gains by investing directly in emerging markets (De Santis, 1997). Given the opportunity to invest directly in the shares of stocks in the developed (DCs) and emerging (EM) markets, it is interesting to know whether the U.S. investors can potentially gain any benefits by investing in ADRs. We test both index models, and SDF-based model.Our findings show that U.S. investors needed to invest in both ADRs and country portfolios in developed in the eighties, and in Latin American countries in early nineties. During the early and late nineties, we find substitutability between ADRs and country portfolios in DCs. As more and more ADRs are enlisted in the US market from developed countries over time, the ADRs become substitutes to country. Similarly, countries with higher number of ADRs irrespective of regions show the same pattern of substitutability between ADRs and country indices. However, such substitutability does not exist for countries with the highest number of ADRs by the end of sample period, 2001. On the other hand, U.S. investors can achieve the diversification benefits by investing ADRs along with U.S. market index in Asia. The significant marginal contribution of one-third of developed countries requires investment in ADRs and U.S. market in the developed countries. And investors do not need to hold both ADRs and country as it was the case in the eighties. On the other hand, investors need to hold both ADRs and country portfolios in most of the Asian countries to achieve diversification benefits at margin

CMS physics technical design report : Addendum on high density QCD with heavy ions

Peer reviewe

The book-to-market and size effects in a general asset pricing model: evidence from seven national markets;

We find a positive relation between returns and Book-to Market ratio (BE/ME) and a negative relation between returns and Market Value (MVE) in all the countries we study. The BE/ME and MVE effects are international in character and remain strong under a general stochastic pricing function that does not depend on a specific asset pricing model and avoids potentially serious simultaneity biases inherent in the Fama & French three-factor model. Finally, potentially important macro and financial variables that we add to the pricing functions do not offer an explanation of the BE/ME effect

The book-to-market and size effects in a general asset pricing model: evidence from seven national markets;

We find a positive relation between returns and Book-to Market ratio (BE/ME) and a negative relation between returns and Market Value (MVE) in all the countries we study. The BE/ME and MVE effects are international in character and remain strong under a general stochastic pricing function that does not depend on a specific asset pricing model and avoids potentially serious simultaneity biases inherent in the Fama & French three-factor model. Finally, potentially important macro and financial variables that we add to the pricing functions do not offer an explanation of the BE/ME effect