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A Class of its Own? The Role of Sustainable Real Estate in a Conditional Value at Risk Multi-Asset Portfolio

Accepted version
Peer-reviewed

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Type

Article

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Authors

Geiger, Peter 
Cajias, Marcelo 

Abstract

In this paper, we analyze the effect of socially responsible investments within a multi-asset portfolio optimization model. We also attempt to bridge the gap in the real estate literature between sustainability principles and investment analysis. To this aim, listed real estate companies with an active sustainability agenda, identified through the MSCI ESG database, represent the sustainable real estate asset class. Applying a downside risk approach by using a conditional value at risk (CVaR) optimization technique, we establish empirically whether diversification benefits can be achieved by investing in companies with a proven track record in sustainability. Our results highlight the potential contribution of listed real estate companies with high sustainability ratings to an institutional investor's portfolio taking into account differences in investment style and risk aversion.

Description

Keywords

Social Responsible Investment, Sustainable Real Estate, Portfolio Optimization, Asset Allocation, CVaR

Journal Title

SSRN Electronic Journal

Conference Name

Journal ISSN

1556-5068
1556-5068

Volume Title

Publisher

Elsevier BV