Investing in real estate and stock markets are popular ways to grow wealth, but can combining them in a portfolio provide the benefits of diversification for investors in the Philippines? According to a recent study presented at the International Conference on Business and Economics by Assistant Professor Agosto from the University of San Carlos, the answer is no.
Agosto’s paper highlighted the positive relationship between the Philippine real estate and stock markets in both the long and short term. While this may seem like a positive development, Agosto’s research suggests that investors cannot gain the benefits of diversification by including both markets in their portfolios.
Agosto’s research also suggests that the causal relationship between the Philippine real estate and stock markets is unidirectional, with stock prices tending to outperform housing prices. This indicates the presence of a wealth effect, with stock market performance contributing positively to the rise in the real estate market. As a result, real estate is used considerably more as an investment vehicle in the Philippines, and house prices are rather high.
While real estate and stock markets are good investment options on their own, Agosto’s findings suggest that investors cannot gain the benefits of diversification by building a portfolio that includes both markets in the Philippines.
This has important implications for investors and policymakers in the country. While real estate and stock markets may seem like attractive options for investment allocation, investors must be aware that including both markets in their portfolios does not offer enough diversification benefits. Instead, they should consider other investment options to diversify their portfolio and manage risk effectively.
Agosto’s study is a valuable contribution to the body of knowledge on real estate in the Philippines, which has a dearth of research on the topic. His work sheds light on the interdependence of the real estate and stock markets in the country, providing important insights for investors and policymakers.
Investors should be aware that including both markets in their portfolio does not provide enough diversification benefits. Instead, alternative investment options should be considered to manage risk effectively.