AFFI International Conference 2017

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On the effectiveness and usefulness of the portfolio insurance strategies for REITs

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Portfolio insurance refers to financial strategies whose goal is to protect portfolio against the downside market risk while allowing investor to benefit from potential market rises. So far the use of these specific strategies has not been the subject of research in the real estate context and there exists no consensus about their effectiveness for this asset class. This paper provides a performance evaluation of both the Constant Proportion Portfolio Insurance and Option-Based Portfolio Insurance techniques for the Real Estate Investment Trusts market. The effectiveness of the strategies is tested on historical return of NAREITs index for the period of Jan. 2000-Jun. 2016. We evaluate the performance of each strategy as a pure investment tool. Overall the results indicate that both PI strategies almost perfectly protect their insured amount and allow to catch-up part of the rise. Gap risk and cash-lock effects are discussed within the results. Robustness is confirmed with a block-bootstrap simulation.


Charles-Olivier Amédée-Manesme    
Université Laval

Philippe Bertrand    
CERGAM, IAE Aix-en-Provence and Kedge Business School

Jean-Luc Prigent    
THEMA, Université de Cergy-Pontoise


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