Abstract
This study analyses the investment performance and effectiveness of risk diversification between M-REITs’ and S-REITs’ by comparing their respective Sharpe Ratio, Treynor Ratio and Jensen’s Alpha including the diversification measures (unsystematic risk divided by total risk and one-minus R squared) calculated on each REITs. The study period for M-REITs’ extends from 2007 to 2016 and for S-REITs’ from 2002 to 2016. Results shows that M-REITs’ perform better than S-REITs’ in terms of Sharpe ratio, Treynor ratio, and Jensen’s Alpha. Total risk of S-REITs’ are higher than M-REITs’. The Beta values for both M-REITs’ and S-REITs’ are less than one, implying that both categories of REITs are less risky than the market index. M-REITs’ have lower R-Squared values than S-REITs’, which suggests that M-REITs’ are poorly diversified than S-REITs’ and therefore, M-REITs’ have more diversification opportunities. The diversification measures computed for M-REITs’ are higher than S-REITs’ and would imply that M-REITs’ have better rate of returns if M-REITs’ diversify their risk (higher risk diversification benefits). The findings from this study aims to help investors to make better investment decision when investing in M-REITs’ and S-REITs’. Top and poor performers of M-REITs’ and S-REITs’ are determined in this study. The findings from this study aims to assist investors determine better investment decisions when considering investing in M-REITs’ and S-REITs’.
Highlights
Properties in the sixties were expensive for most people because properties are classified as highly priced assets
The hypotheses examined for this study are as follows: Hypothesis 1 To examine the Beta value for both of each M-Real Estate Investment Trusts (REITs)’ and Singapore Real Estate Investment Trusts (S-REITs)’: Ho: 9M-REITs’’ β > S-REITs’’ β (M-REITs’ have higher Beta [market risk] compared to S-REITs’) H1: Malaysia Real Estate Investment Trusts (M-REITs)’’ β < S-REITs’’ β (M-REITs’ have lower Beta [market risk] compared to S-REITs’) Hypothesis 2 To examine the performance measurement between M-REITs’ and S-REITs’ index using Sharpe ratio: Ho: M-REITs’’ Si < S-REITs’’ Si (M-REITs’ have lower Sharpe ratio compared to S-REITs’) H1: M-REITs’’ Si > S-REITs’’ Si (M-REITs’ have higher Sharpe ratio compared to S-REITs’) Hypothesis 3 To examine the performance measurement between M-REITs’ and S-REITs’ index based on Treynor Ratio: Ho: M-REITs’’ Ti < S-REITs’’ Ti (M-REITs’ have lower Treynor ratio compared to S-REITs’)
H1: M-REITs’’ Ti > S-REITs’’ Ti (M-REITs’ have higher Treynor ratio compared to S-REITs’) Hypothesis 4 To examine performance measurement between M-REITs’ and S-REITs’ index according to Jensen’s Alpha: Ho: M-REITs’’ αi < S-REITs’’ αi (M-REITs’ have lower Jensen’s Alpha compared to S-REITs’) H1: M-REITs’’ αi > S-REITs’’ αi (M-REITs’ have higher Jensen’s Alpha compared to S-REITs’) Hypothesis 5 To examine risk diversification benefits between M-REITs’ and S-REITs’: Ho: M-REITs’’ Rd < S-REITs’’ Rd (M-REITs’ have lower risk diversification benefits compared to S-REITs’) H1: M-REITs’’ Rd > S-REITs’’ Rd (M-REITs’ have higher risk diversification benefits compared to S-REITs’)
Summary
Properties in the sixties were expensive for most people because properties are classified as highly priced assets. The hypotheses examined for this study are as follows: Hypothesis 1 To examine the Beta value for both of each M-REITs’ and S-REITs’: Ho: 9M-REITs’’ β > S-REITs’’ β (M-REITs’ have higher Beta [market risk] compared to S-REITs’) H1: M-REITs’’ β < S-REITs’’ β (M-REITs’ have lower Beta [market risk] compared to S-REITs’) Hypothesis 2 To examine the performance measurement between M-REITs’ and S-REITs’ index using Sharpe ratio: Ho: M-REITs’’ Si < S-REITs’’ Si (M-REITs’ have lower Sharpe ratio compared to S-REITs’) H1: M-REITs’’ Si > S-REITs’’ Si (M-REITs’ have higher Sharpe ratio compared to S-REITs’) Hypothesis 3 To examine the performance measurement between M-REITs’ and S-REITs’ index based on Treynor Ratio: Ho: M-REITs’’ Ti < S-REITs’’ Ti (M-REITs’ have lower Treynor ratio compared to S-REITs’). The research intends to develop on existing literature by analysing and providing evidence on the performance and risk diversification benefits of M-REITs’ and S-REITs’
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