The asset allocation decision often relies upon correlation estimates arising from short-run data. Short-run correlation estimates may, however, be distorted by frictions. In this paper, we introduce a long-run wavelet-based correlation estimator, distinguishing between long-run common behavior...

We estimate trends in diversification for equity, debt, and real estate within and across countries. After 2000, we uncover a marked and near ubiquitous decline in diversification, which coincides with sharply higher levels of investment risk. This decline is associated with country economic...

We present new international diversification indexes across equity, sovereign debt, and real estate. The indexes reveal a marked and near ubiquitous decline in diversification potential across asset classes and markets for the post-2000 period. Analysis of panel data suggests that the decline is...

Asset diversification has long been fundamental to investment risk mitigation. We compute new long-term country-specific indices of diversification potential for equity, sovereign debt, and real estate. Findings for the 1986-2021 study period indicate markedly declining or persistently dampened...

Most of the methods used by financial institutions to implement valueat- risk models are based on the multivariate Gaussian distribution with a constant correlation matrix. In this paper we use VaR calculation in a reverse way to imply the correlation between asset price changes. The...

We measure market integration at a firm-level for the US stock market with the rest of the world. The properties of firm-level integration are explored across time and industries and then stocks are sorted into high- and low-integration portfolios. The role of the least globally integrated US...

The evidence for international diversification as a means to curtail portfolio risk relies predominantly on short-run data. In this paper, we examine the extent to which the risk reduction benefits of international investment hold in the long-run. Employing a multi-horizon non-parametric filter,...

This paper explores integration and contagion among US metropolitan housing markets. The analysis applies Federal Housing Finance Agency (FHFA) house price repeat sales indexes from 384 metropolitan areas to estimate a multi-factor model of U.S. housing market integration. It then identifies...

This study evaluates the effectiveness of geographic diversification in reducing housing investment risk. To characterize diversification potential, we estimate spatial correlation and integration among 401 US metropolitan housing markets. The 2000s boom brought a marked uptrend in housing...

Geographic diversification is fundamental to risk mitigation among investors and insurers of housing, mortgages, and mortgage-related derivatives. To characterize diversification potential, we provide estimates of integration, spatial correlation, and contagion among US metropolitan housing...