Correlations Among Major Asset Classes at end of September 2016
based on DCC-GARCH empirical methodology with monthly data...
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Asset Class Correlations & Volatilities: September 2016

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This chart shows correlations and volatilities for nine asset classes based on data through September 2016. For example, the correlation between exchange-traded U.S. Equity REITs and U.S. large-cap stocks is just 0.62, indicating strong diversification benefits. The chart also shows the latest volatilities. I update these figures every month.

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Asset Class Correlations & Volatilities: September 2016

  1. 1. Correlations Among Major Asset Classes at end of September 2016 based on DCC-GARCH empirical methodology with monthly data All figures are based on a DCC-GARCH (Dynamic Conditional Correlation – Generalized Autoregressive Conditional Heteroskedasticity: Engle 2002) model using monthly data through September 2016. Listed U.S. equity REITs (FTSE NAREIT All U.S. Equity REIT), listed U.S. mortgage REITs (FTSE NAREIT Mortgage REIT), and U.S. large-cap stocks (Russell 1000) from January 1972; non-U.S. listed property companies (FTSE EPRA/NAREIT Developed x-US) from January 1990; U.S. REIT Preferred Stocks (BofA/ML Preferred Stock REITs) from January 1997; U.S. small-cap value stocks (Russell 2000 Value) from January 1979; non-U.S. stocks (MSCI AC World ex-US) from January 1988; U.S. bonds (BC US Aggregate) from January 1976; non-U.S. bonds (BS Global Aggregate x-USD) from January 1990. Source: NAREIT analysis using Matlab with Kevin Sheppard’s DCC-GARCH routine. Listed U.S. Equity REITs Listed U.S. Mortgage REITs Non-U.S. Listed Property Companies U.S. REIT Preferred Stocks U.S. Large-Cap Stocks U.S. Small-Cap Value Stocks Non-U.S. Stocks U.S. Bonds Non-U.S. Bonds Volatility (%) Listed U.S. Equity REITs 1 0.61 0.67 0.48 0.62 0.62 0.48 0.30 0.29 16.3 Listed U.S. Mortgage REITs 1 0.55 0.44 0.50 0.56 0.29 0.36 0.20 15.1 Non-U.S. Listed Property Companies 1 0.36 0.69 0.61 0.88 0.23 0.56 17.0 U.S. REIT Preferred Stocks 1 0.28 0.32 0.22 0.58 0.30 4.3 U.S. Large-Cap Stocks 1 0.85 0.84 0.17 0.18 12.9 U.S. Small-Cap Value Stocks 1 0.72 0.15 0.12 16.2 Non-U.S. Stocks 1 0.09 0.36 15.0 U.S. Bonds 1 0.54 3.2 Non-U.S. Bonds 1 8.0 0

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