International diversification with securitized real estate and the veiling glare from currency risk

This paper analyzes diversification benefits from international securitized real estate in a mixed-asset context. We apply regression-based mean-variance efficiency tests, conditional on currency-unhedged and fully hedged portfolios to account for foreign exchange risk exposure. From the perspective of a US investor, it is shown that first, international diversification is superior to a US mixed-asset portfolio, second, adding international real estate to an already internationally diversified stock and bond portfolio results in a further significant improvement of the risk-return trade-off and, third, considering unhedged international assets could lead to biased asset allocation decisions not realizing the true diversification benefits from international assets. Our in-sample results are quite robust in out-of-sample analysis and when investment frictions like short selling constraints are introduced. --Diversification Benefits,International Mixed-Asset Portfolios,Currency Hedging,Spanning Tests,Short Selling Constraints

Downside risk optimization in securitized real estate markets

Optimization of international securitized real estate portfolios has been a key topic for several decades. However, most previous analysis has focused on regional diversification by applying the traditional mean-variance (MV) framework suggested by Markowitz (1952) even if the limitations of this approach are well-known. Thus, we focus on a more suitable and appealing downside risk (DR) framework suggested by Estrada (2008), which applies a similar optimization algorithm as the MV framework. The analysis covers the eight largest securitized real estate markets from January 1990 to December 2009 and thus captures a more global perspective. The main findings are as follows: first, the return distributions are non-normally distributed and negatively skewed. Second, optimal portfolio weights differ substantially between the MV and DR approach. Third, portfolio weights are shifted from the U.S. and Australian market to the Dutch and the French market when applying the DR framework instead of the MV framework. Fourth, the dominance of the DR framework is well-documented by comparing out-of-sample performance. The empirical results are remarkable and emphasize the practical merit of the presented DR framework for investors and portfolio managers. --Downside Risk Analysis,International Real Estate Markets,Portfolio Management,Portfolio Optimization,Out-of-Sample Analysis

Quantitative Approaches to Upland Game Bird Conservation in Kansas

The Great Plains region of North America is an important ecosystem supporting many plant and animal species, but one of the most endangered ecosystems in the world. Loss and degradation of grasslands in the Great Plains region has resulted in major declines in abundance of grassland bird species. To ensure future viability of grassland bird populations, it is crucial to evaluate specific effects of environmental factors across species to determine drivers of population decline and develop effective conservation strategies. In this study, I took a multi-species approach to understanding effects of environmental factors on four species of upland game birds in Kansas. I quantified effects of land cover and weather changes, as well as conservation practice implementation on lesser and greater prairie-chickens (Tympanuchus pallidicinctus and T. cupido, respectively), northern bobwhites (Colinus virginianus), and ring-necked pheasants (Phasianus colchicus). I found evidence of nonlinear, threshold effects of land cover change on abundance of all four focal species, though specific effects differed by species and spatial scale. I then focused on lesser prairie-chicken conservation and used a decision support tool to select candidate areas to prioritize conservation efforts and evaluate tradeoffs between conservation and economic objectives in different conservation scenarios. I found difference in conservation approach led to different optimal solutions, though some areas were important regardless of conservation approach. It is important to study drivers of species population decline, and apply ecological findings of such studies to improve conservation management. In this study, I both examined effects of land cover and weather on abundance of multiple species of upland game birds, and applied ecological knowledge to systematic conservation planning for an upland game bird species of conservation concern. My results provide valuable context to managers for optimizing conservation management for grassland birds in Kansas

International diversification benefits with foreign exchange investment styles

This paper provides a comprehensive analysis of portfolio choice with popular foreign exchange (FX) investment styles such as carry trades and strategies commonly known as FX momentum, and FX value. We investigate if diversification benefits can be achieved by style investing in FX markets relative to a benchmark allocation consisting of U.S. bonds, U.S. stocks, and international stocks. Overall, our results suggest that there are significant improvements in international portfolio diversification due to style-based investing in FX markets (both in the statistical, and most importantly, in the economic sense). These results prevail for the most important investment styles after accounting for transaction costs due to re-balancing of currency positions, and also hold in out-of-sample tests. Moreover, these gains do not only apply to a mean-variance investor but we also show that international portfolios augmented by FX investment styles are superior in terms of second and third order stochastic dominance. Thus, even an investor who dislikes negatively skewed return distributions would prefer a portfolio augmented by FX investment styles compared to the benchmark. --International Diversification,Foreign Exchange Speculation and Hedging,Carry Trades,Stochastic Dominance,Investment Styles

Convergence to self-similar profiles in reaction-diffusion systems

We study a reaction-diffusion system on the real line, where the reactions of the species are given by one reversible reaction pair satisfying the mass-action law. We describe different positive limits at both sides of infinityand investigate the long-time behavior. Rescaling space and time according to the parabolic scaling, we show that solutions converge exponentially to a similarity profile when the scaled time goes to infinity. In the original variables, these profiles correspond to asymptotically self-similar behavior describing the phenomenon of diffusive mixing of the different states at infinity.Our method provides global exponential convergence for all initial states with finite relative entropy. For the case with equal stoichiometric coefficients, we can allow for self-similar profiles with arbitrary equilibrated states,while in the other case we need to assume that the two states atinfinity are sufficiently close such that the self-similar profile is relative flat

Self-similar pattern in coupled parabolic systems as non-equilibrium steady states

We consider reaction-diffusion systems and other related dissipative systems on unbounded domains which would have a Liapunov function (and gradient structure) when posed on a finite domain. In this situation, the system may reach local equilibrium on a rather fast time scale but the infinite amount of mass or energy leads to persistent mass or energy flow for all times. In suitably rescaled variables the system converges to a steady state that corresponds to asymptotically self-similar behavior in the original system