Investing In Times Of Inflation Fears: Diversification Properties Of Investments In Liquid Real Assets

Date Added: Jun 2009
Format: PDF

The financial crisis and the rescue measures taken by governments and central banks increased investors' interest in liquidity and in real assets supposed to offer a hedge against inflation. Against this background, the authors investigate empirically four real assets (real estate, commodities, infrastructure, and shipping) for which there are investment instruments available which trade in liquid markets. This empirical study using data from 1999 to 2009 yields several results: In most cases, the addition of real assets improved portfolio performance (measured with Sharpe ratio, Sortino ratio, Omega ratio, and Modified Sharpe ratio) in comparison with a base portfolio consisting only of standard stocks and bonds.