http://repub.eur.nl/res/aut/14812/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/30848/ 2012-01-12T00:00:00Z This thesis consists of three studies in the investments field, which examines the interaction between long and short positions and their impact on market participants, prices and portfolio allocations. In chapter 2, I examine the optimal portfolio composition for institutional investors when considering liabilities. Institutional investors, by taking into account their short positions, which in effect are their liabilities, make different asset allocation decisions (long positions). Important in the optimization in excess of liabilities is the role of the asset classes in hedging the market value of liabilities. In chapter 3, I turn to the impact of short positions of market participants on prices by showing that limits to shorting lead to biased prices. In particular, I find that the presence of short sale constraints can explain the existence of a premium to Net Asset Value for Real Estate Investment Trusts. Miller (1977) argues that as short-sale constraints keep more pessimistic investors out of the market, prices tend to reflect a more optimistic valuation than they otherwise would. The results of 4 suggest that overpricing caused by the presence of short sale constraints is not solely due to restriction on negative information but also partly a result of capitalized lending income. I show that revenue associated with security lending is capitalization in prices, as investors are willing to pay a premium associated with lending fees. http://repub.eur.nl/res/pub/22199/ 2010-12-01T00:00:00Z This study examines the liability hedging characteristics of both direct and indirect real estate with the advent of fair value accounting obligations for pension funds. We explicitly model pension obligations as being subject to interest and inflation risk to analyze the ability of real estate investments in hedging the fair value of pension liabilities and to quantify its role in an asset liability management (ALM) portfolio. We find that the portfolio composition differs depending on the definition of liability return. When liability returns solely follow actuarial changes, the mean-variance efficient portfolio allocations toward direct real estate and fixed income decrease compared to the asset-only optimization. When accounting for nominal liability obligations, real estate offers hedging benefits against interest rates for short holding periods but not for long-term institutional portfolios. The inclusion of inflation risk renders a limited role for direct real estate in an ALM portfolio, while indirect real estate obtains no allocation. Inflation is at the heart of the discrepancy between reported and predicted pension plan allocations. Once accounting for inflation, the projected allocations come close to reported ones. http://repub.eur.nl/res/pub/12674/ 2007-10-12T00:00:00Z This study examines the liability hedging characteristic of both direct and indirect real estate, in the advent of fair value accounting obligations for pension funds. We explicitly model pension obligations as being subject to interest and inflation risk to analyze the ability of real estate investments in hedging the market value of pension liabilities and to quantify its role in an ALM portfolio. Based on a sample period of 1984-2006, direct and indirect real estate merit inclusion in an ALM portfolio because of their attractive risk-reward properties and its diversification potential, rather than its liability hedging abilities.