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Stress Test For The Financial Optimization Models During The 2009 Recession

Kasarinlan: Philippine Journal of Third World Studies

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Title Stress Test For The Financial Optimization Models During The 2009 Recession
 
Creator Ahmadi, Hamid
Kuhle, James A.
Varshney, Sanjay
 
Subject RAMP Model
Financial Models
Optimization Models
REIT
 
Description The Sub-prime Mortgage credit crisis has led to a major downturn in virtually all financial sectors and consequently  the real estate sector received the brunt of  the 2008 – 2009 financial crisis. However, this downturn undoubtedly has provided an opportunity to test what investment strategy could have deflected the shocking force of this crisis and specifically what method could have minimized the risk of the most negatively affected investment -- Equity Real Estate Trust funds.   Using ex-post data of EREITs, this research examines the implications and benefits of employing optimal portfolio allocation methods to different size EREIT portfolios during current financial crisis. This study compares the returns of optimally weighted EREIT portfolios to equally weighted EREIT portfolios, against the Dow Jones Equity REIT Index (DJEREIT Index).  The results indicate that a properly rebalanced risk-adjusted model portfolio (RAMP) outperforms both an equally weighted portfolio of identical assets and the DJEREIT Index.  In fact, the twelve-asset optimized portfolio yields a superior return of 12.7% when compared to a return of an equally weighted portfolio of identical EREITs, and the DJEREIT Index during the three-year time period examined.
 
Publisher Clute Institute
 
Date 2010-01-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://clutejournals.com/index.php/JBER/article/view/665
10.19030/jber.v8i1.665
 
Source Journal of Business & Economics Research (JBER); Vol. 8 No. 1 (2010)
2157-8893
1542-4448
10.19030/jber.v8i1
 
Language eng
 
Relation http://clutejournals.com/index.php/JBER/article/view/665/651