Do Regime Shifts Affect Mixed-Asset Portfolios in Thailand?

Abstract

This study examines the benefits of diversification by adding real estate to a portfolio of traditional assets in Thailand during various regimes from January 1994 to June 2013. More specifically, Amonhaemanon compares the performance of a stock portfolio (benchmark portfolio) and that of an optimal mixed portfolio composed of stock and real estate (direct and indirect real estate). Using the Sharpe ratio as a measure of portfolio performance, the author tests whether there is a statistically signifi cant difference between benchmark and mixed portfolios among different regimes. The empirical results show that all types of real estate provide benefits for Thai investors in the sense that the mixed portfolio always performs better than does the benchmark portfolio. However, the Sharpe ratio of the two portfolios is statistically significantly different only since the year 2000, after the financial crisis in Thailand.