TY - JOUR
T1 - What is an Optimal Allocation in Hong Kong Stock, Real Estate, and Money Markets
T2 - An Individual Asset, Efficient Frontier Portfolios, or a Naïve Portfolio? Is This a New Financial Anomaly?
AU - Lv, Zhihui
AU - Tsang, Chun Kei
AU - Wagner, Niklas F.
AU - Wong, Wing Keung
N1 - This work was supported by the Guangzhou Municipal Science and Technology Bureau (202201010246), Guangdong Provincial Department of Education (2021KQNCX020), Research Grants Council (RGC) of Hong Kong (project number 12500915), and Ministry of Science and Technology (MOST, Project Numbers 106-2410-H-468-002 and 107-2410-H-468-002-MY3).
The first author was supported by Guangzhou Municipal Science and Technology Bureau (202201010246) and Guangdong Provincial Department of Education (2021KQNCX020). The fourth author would like to thank Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. This research has been supported by Northeast Normal University, China, Asia University, China Medical University Hospital, The Hang Seng University of Hong Kong, Hong Kong Shue Yan University, Research Grants Council (RGC) of Hong Kong (project number 12500915), and Ministry of Science and Technology (MOST, Project Numbers 106-2410-H-468-002 and 107-2410-H-468-002-MY3), Taiwan.
Publisher Copyright:
© 2022 Taylor & Francis Group, LLC.
PY - 2023/4/9
Y1 - 2023/4/9
N2 - To test for arbitrage opportunities and market efficiency in the Hong Kong money, stock, and real estate markets, we find that the money market stochastically dominates both the stock and real estate markets. Furthermore, the real estate market dominates the stock market, the money market dominates nearly all the efficient frontier portfolios, none of the efficient portfolios dominates the money market, and the money market also dominates the equal-weighting portfolio. This infers that in some cases investors could achieve higher expected ex-ante utility by investing in an individual asset rather than a portfolio. Our conclusions drawn from the pre-COVID-19 period are the same as those drawn from the entire period and the conclusions drawn from the COVID-19 period are the same as those drawn from the entire period except that the money market only stochastically dominates some of the efficient frontier portfolios. Our findings question diversification benefits in the Hong Kong capital market during our sample period, including both the pre-COVID-19 and COVID-19 periods.
AB - To test for arbitrage opportunities and market efficiency in the Hong Kong money, stock, and real estate markets, we find that the money market stochastically dominates both the stock and real estate markets. Furthermore, the real estate market dominates the stock market, the money market dominates nearly all the efficient frontier portfolios, none of the efficient portfolios dominates the money market, and the money market also dominates the equal-weighting portfolio. This infers that in some cases investors could achieve higher expected ex-ante utility by investing in an individual asset rather than a portfolio. Our conclusions drawn from the pre-COVID-19 period are the same as those drawn from the entire period and the conclusions drawn from the COVID-19 period are the same as those drawn from the entire period except that the money market only stochastically dominates some of the efficient frontier portfolios. Our findings question diversification benefits in the Hong Kong capital market during our sample period, including both the pre-COVID-19 and COVID-19 periods.
KW - efficient frontier
KW - fund portfolios
KW - risk aversion
KW - Stochastic dominance
UR - https://www.ingentaconnect.com/content/routledg/mree20/2023/00000059/00000005/art00016
UR - http://www.scopus.com/inward/record.url?scp=85143388306&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2022.2136941
DO - 10.1080/1540496X.2022.2136941
M3 - Journal article
AN - SCOPUS:85143388306
SN - 1540-496X
VL - 59
SP - 1554
EP - 1571
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 5
ER -