Title: Multi-asset investing: Correlation structure between Canadian real estate and equity markets
Authors: Ivan Medovikov - Brock University (Canada) [presenting]
Jean-Francois Lamarche - Brock University (Canada)
Abstract: Investors often view real estate as means of diversifying market risk away from equity portfolios. We put this notion to the test in the Canadian context and study nature of dependence between returns to an index of Canadian real estate trusts (REITs) and public equities. Using a semi-parametric copula model we show dependence between the two asset classes to be non-linear and skewed toward distribution tails. In particular, we find that linkages between real estate and equities to be strongest and also positive during market downturns, suggesting that real estate may be poor choice when it comes to protecting against stock market shocks.