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Abstract
This article explores which asset classes add value to a traditional portfolio of stocks, bonds, and cash. The authors also determine the optimal weights of all asset classes in the optimal portfolio. This article adds to the literature by distinguishing 10 different investment categories simultaneously in a mean-variance analysis as well as a market portfolio approach. The authors also demonstrate how to combine these two methods. The results suggest that real estate, commodities, and high yield add most value to the traditional asset mix. A study with such a broad coverage of asset classes has not been conducted before, neither in the context of determining capital market expectations and performing a mean-variance analysis, nor in assessing the global market portfolio.
TOPICS: Portfolio construction, global, real estate, commodities
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