Global REIT Research Articles

Climate risks and the REITs market

AbstractThis study presents results supporting the need to price climate risks in real estate investment trusts. We approach this objective by conducting some empirical analyses for global, regional, and [US] sectoral REITs for want of wider coverage while we also consider variants of climate risks involving physical and transition risks. We first establish that climate concerns amplify the volatility of REIT returns. While our results are split for sectoral REITs, we find that both physical and transition risks magnify the volatility in the regional and global REITs market. However, when we consider the US sectoral REITs, we find contrasting evidence between the two variants of climate risks. While the transition risks seem to raise the REITs market volatility, perhaps owing to improved trading in the market as signalled by some level commitments towards addressing climate change, the physical risks associated with damages due to climate change tend to lower the REITs market volatility due to lower trading. Consequently, we formulate a framework that enables a profit‐maximizing investor to observe climate risks when making investment decisions in the REITs market, and we further show that doing so provides higher economic gains than ignoring it. This outcome has implications for investors looking for the best hedging strategy against climate‐related risks, especially as the world intensifies efforts towards de‐carbonization.

Diversifying and hedging REIT portfolios with cryptocurrencies: Evidence from global and regional REIT indices

Hedging the financial risk of portfolios of securitized real estate assets is daunting because of the unique nature of the underlying assets and because no direct market exists to trade on property-related derivatives. In this paper, we conduct a global study of the diversification and risk mitigation benefits of cryptocurrencies for REIT stocks. Specifically, we examine the dynamic relationship between Bitcoin and REIT indices obtained from multiple countries and regions of the world. We also explore whether portfolios of REIT stocks that are hedged with Bitcoin futures obtain significant improvement in portfolio risk mitigation and return performance. Furthermore, given that Bitcoin and REIT stocks are prone to large volatility swings, we examine the nature of the tail dependences in the multivariate distributions of our REIT indices universe and Bitcoin using Archimedean copula functions. Lastly, we compare the market risk of Bitcoin-hedged REIT portfolios to the unhedged portfolios of REIT stocks using value-at-risk. We find region-specific benefits from using Bitcoin to hedge REIT exposure. Furthermore, we show that using Bitcoin to dynamically hedged REIT portfolios had minimal impact on the bivariate and multivariate joint distributions of REIT portfolios. We also find evidence of region-specific reductions in the market risk exposure of dynamically hedged REIT portfolios relative to unhedged and naively hedged REIT portfolios. We posit that Bitcoin could improve the mean-variance frontiers of REIT investors in countries with higher market friction and lower global integration.

Board Gender Diversity and Environmental Practice in Global REITs: Examining the Impact on Policies and Outcomes

Board Gender Diversity and Environmental Practice in Global REITs: Examining the Impact on Policies and Outcomes

How does South Africa's real estate investment trusts integrate with major global REITs markets? A time-frequency approach

We contribute to the literature on the integration of stock markets by examining the linkages between South African REIT (SA REIT) and 10 of the world's most developed REITs, from Europe, Asia, North America, and Oceania. Patterns of market co-movement are analysed using the wavelet coherence measure in the time-frequency domains. The results indicate that patterns of linkages are not uniform across the pool of the geographical market pairings, rather they show varied unique patterns for specific pairs of markets. Generally, for all the regional block pairs with South Africa, diverse directional linkages amidst significant stretches of medium to few large-size coherence zones spread across lower frequencies but dissipate to weakly scattered smaller-size coherencies at intermediate and short-run periods. The US largely leads South Africa which can be attributed to the difference in the share of the global REIT index. However, South Africa leads Australia and New Zealand. Given that South Africa is smaller than Australia but bigger than New Zealand, the findings suggest that the size of the REIT market plays a little role as compared to the magnitude of the difference in size. Such low levels of coherencies could be explored for diversification gains at the respective frequencies while being mindful of the specific combinations. Although not well-integrated with global REITs, we surmised that SA REIT is far from being an isolated market. Further, no evidence of contagion was found in the markets post-Brexit since we observe no discernible long stretches of high-frequency coherencies after June 2016.

Frequency volatility connectedness and market integration in international real estate investment trusts

Within the context of market integration, this paper explores the frequency connectedness of volatilities across 14 international REIT markets over the last ten years. Following Barunik and Krehlik (2018), we determine whether the REIT volatility connectedness results from short-, medium- or long-term impacts of shocks can reveal the underlying frequency sources of volatility connectedness. We also identify the systematic risk source that the US REIT market played an influential role for volatility connectedness across global REITs. Our results are valuable for policy maker to guide the future development and consolidation of younger REIT markets over time.

Real Estate Investment Trusts’ (REITs) Asset Management Strategies Within Global REIT Portfolios

Abstract Investment in REITs has become significant in recent years due to the stability and sustainable performance of the investment. A study on the management perspective is very important but this perspective is very limited. Asset management will derive from the profit optimization of the investment. Therefore, it is important to assess asset management strategies to ensure the sustainable performance of the assets. This paper aims to assess asset management strategies among matured REIT companies in developed countries in comparison with Malaysian REIT companies from the perspective of the managers. This research employed qualitative analyses by using content analysis techniques. A total of 41 REIT companies from the United States (US), Japan, Singapore, Australia and Malaysia were assessed. The analyses focused on the similarities and differences between the strategy framework identified in the literature review and the strategies adopted by global REITs and Malaysian REITs under review. The study will enable all REIT stakeholders to become well-informed on global REIT asset management that will derive the maximum profit from the investment. The success of developed countries’ REITs will provide guidelines for Malaysian REITs to adopt the best practice of strategic asset management from REITs in mature markets. Furthermore, this study is one of few papers that have discussed the issue of strategic property investment, particularly focusing on REITs.

Analysing the relationship between global REITs and exchange rates: Fresh evidence from frequency-based quantile regressions

Analysing the relationship between global REITs and exchange rates: Fresh evidence from frequency-based quantile regressions

Are there contagion effects in the REIT market? The case of Brexit

On June 23, 2016 the Brexit event that tremendously surprised and shocked investors around the world was considered the largest black swan with a political earthquake in 2016, and even spread to the international financial market and real estate market. This study uses the heteroscedasticity biases based on correlation coefficients by Forbes and Rigobon and the GJR-GARCH model to examine the contagion effects of the Brexit event on global REITs markets. The data are collected at the daily interval covering the time period from June 23, 2015 to December 30, 2016. Evidence reveals that no REITs markets suffered from Brexit, suggesting no transmission of Brexit across REITs markets, even the neighbouring markets, is found.

How resilient are REITs to a pandemic? The COVID-19 effect

PurposeReal estate investment trusts (REITs) are historically considered as attractive assets to investors particularly as the underlying assets are properties which are income-producing. REITs also distribute substantial amount of profits as dividends to shareholders. Stephen and Simon (2005) find that REITs in a mixed asset portfolio of stocks and bonds enhance returns and reduce risk. This paper examines the role a pandemic (COVID-19) plays in the performance of global REITs index and REIT sectors.Design/methodology/approachTo examine the effects of COVID-19 on REITs, the year-to-date (YTD) returns of global returns index and REITs sectors in the United States are observed and a comparative analysis is employed from January 2020 to May 2020.FindingsBased on a three-month return ending 22 May 2020, FTSE EPRA NAREIT index is the biggest loser at −31.83% whilst the FTSE EPRA Asia–Pacific index has the lowest loss at −23.20%. The author examines YTD returns which show disparities on the effect of COVID-19 on REIT sectors. The US market is examined; most REIT sectors suffered big losses as at April 2020; the analysis reveals YTD returns for the top three REIT sector losers are lodging/resort REITs (−45.81%), retail REITs (−41.16%) and office REITs (−22.63%). Data centre REITs are the only sector REITs with positive returns at 17.66%.Practical implicationsMost sector REITs during the pandemic have lost considerable value based on YTD returns as at May 2020. Flight to quality is expected during this uncertain period to REITs such as data REITs, grocery-anchored REITs and storage REITs. These REITs are not as adversely affected by COVID-19 in comparison to other REITs.Originality/valueThis paper identified the impact of COVID-19 on the performance of global REITs and US sector REITs during the periods from January 2020 to May 2020.

Trend Following and Momentum Strategies for Global REITs

In this study, we investi- gate whether the risk-Adjusted returns of a global REIT portfolio would be enhanced by adopting a trend following global strategy (which is an abso- lute concept sometimes known as absolute mo- mentum), a momentum-based strategy (which is a relative concept and requires individual country al- locations), or indeed a combination of the two. e examine the results in terms of both a dedicated global REIT exposure, and the impact on a multi- asset portfolio. We find that the main improve- ments arise when the broad index is replaced with one of the four trend following strategies. The port- folios deliver similar returns but volatility is re- duced by up to a quarter to the 8%-9% range, the Sharpe ratios increase by 0.1 to 0.5 with the main benefit being the reduction in the maximum draw- down to under 30% compared to 43% when the broad index was used. We thus find that a com- bined momentum and trend following a global REIT strategy can be beneficial for both a dedicated REIT portfolio and adding REITs to a multi-Asset portfolio.

A comparison of realised measures for daily REIT volatility

ABSTRACTRecent advances in financial econometrics have led to the development of a variety of estimators of asset volatility using frequently sampled price data, known as ‘realised measures’. These estimators rely on different assumptions and take many different functional forms. In this paper, we aim to examine the accuracy of these estimators in the measurement of daily volatility of REIT returns. We consider a wide range of commonly used realised measures and apply them to several major global REIT markets. Our findings suggest that there is no single estimator which can perform the best for all markets under study. The best-performing estimator varies across markets. We obtain our results by considering the accuracy of both volatility estimation and forecast and by using multiple robust evaluation metrics.

International equity REITs: five major future directions

PurposeThe purpose of this paper is to analyze chapters from the recently publishedRoutledge REITs Research Handbookto identify five major future directions for international equity REITs.Design/methodology/approachLiterature review and critical analysis of chapters from the recently publishedRoutledge REITs Research Handbook.FindingsThe five major future directions for international equity REITs are proposed to comprise an increasing focus on people and on cash flow rather than on property (with the cognitive risk attaching thereto), the changing nature of REITs as they respond to changes in society globally, the evolution of the global flagship REIT and the emergence of global regulation of REITs (particularly in the spheres of debt and leverage).Research limitations/implicationsWhile five major future directions for international equity REITs are identified which may have an impact on the risk/return profile, further research is required to determine which directions may be significant and which trivial and which may be independent and which interactive.Practical implicationsIdentification of five major future directions for international equity REITs provides managers and promoters with guidance concerning potential areas of focus for future product development in the REIT sector.Originality/valueWhile quantitative research concerning international equity REITS abounds, qualitative research is limited with little academic research undertaken into possible future directions for the sector.

YTL Corporation Berhad

The company that have been chosen by our company is YTL Corporation Berhad. YTL Corporation Berhad is an integrated infrastructure developer with extensive operations in countries including Malaysia, the United Kingdom, Singapore, Indonesia, Australia, Japan, Jordan and China and total assets of RM70.4 billion (USD17.3 billion). Tan Sri Dato (DR) Francis Yeoh Sock Ping as the CEO, the core businesses of the YTL Group comprise utilities, construction contracting, cement manufacturing, property development and investment, hotel development and management, e-commerce initiatives and internet-based education solutions and services. YTL Corp is amongst the largest companies listed on Bursa Malaysia Securities Berhad and is a component of the FTSE Bursa Malaysia Mid 70 Index. YTL Corp has also had a secondary listing on the Tokyo Stock Exchange since 1996 and was the first non-Japanese Asian company to list on the Tokyo exchange. YTL Corp, together with its listed entities in Malaysia (YTL Power International Berhad, YTL Land & Development Berhad, and YTL Hospitality REIT), has a combined market capitalisation of approximately RM21.2 billion (USD5.2 billion) as at 28 February 2019. YTL Corp also has a stake in Singapore-listed Starhill Global REIT, which owns prime retail assets in Singapore, Malaysia, Japan, China and Australia. The YTL Group is committed to producing world class products and services at competitive prices. This corporate philosophy has enabled the YTL group to build up a growing customer base of more than 12 million customers globally over the last 30 years. YTL Corp also won many awards throughout their operation within the years. Currently in 2018, they were honoured with the award ‘Company of The Year’ in category of Conglomerate for CSR Malaysia Awards 2018. YTL Corporation won the 2018 Global Responsible Business Leadership Awards, in the category of Community Empowerment Excellence. YTL Corp operating 1,212 MW power stations in Paka & Pasir Gudang, Malaysia. They also do coal- fired power generation and electricity transmission and distribution. Meanwhile, the high-speed rail link between KLIA & KL Sentral also involved YTL Corp where they take 50% of the stake. YTL Corps was the first company to introduce turnkey construction in Malaysia. They also the first Independent Power Producer in Malaysia. YTL Corporation carries out its cement manufacturing activities through its subsidiary YTL Cement Berhad. YTL Cement owns over 70 batching plants 700 cement trucks, operating throughout Malaysia. They also do residential property development activity through YTL Land & Development Berhad.

IDENTIFICATION OF MACROECONOMIC FACTORS ON EXCESSIVE RETURNS: A LITERATURE REVIEW

Asian REITs could be considered as one of the fastest growing assets in the world. Japan is currently the biggest market in Asia and Asian REITs market is very much progressing to expand with the emerging of two major regional economies, China and India. Previous studies have proved that Asian REITs are able to show competitive advantage in most of mixed-asset scenarios and have significant roles in improving efficient global REITs portfolio returns. Previous findings also have shown that REITs are able to give remarkable return compare to other asset classes. Similar with other type of portfolio investment, REITs also have high interaction with macroeconomic factors such as inflation and interest rate which represent the economic situation of the countries. The excessive return is used to measure the performance that is affected by the macroeconomic factors by setting a benchmark which will give an added value to the portfolio. Hence, the aim of this research is to review on the literature of the macroeconomic factors on excessive returns Asian REITs.

IDENTIFICATION OF MACROECONOMIC FACTORS ON EXCESSIVE RETURNS: A LITERATURE REVIEW

Asian REITs could be considered as one of the fastest growing assets in the world. Japan is currently the biggest market in Asia and Asian REITs market is very much progressing to expand with the emerging of two major regional economies, China and India. Previous studies have proved that Asian REITs are able to show competitive advantage in most of mixed-asset scenarios and have significant roles in improving efficient global REITs portfolio returns. Previous findings also have shown that REITs are able to give remarkable return compare to other asset classes. Similar with other type of portfolio investment, REITs also have high interaction with macroeconomic factors such as inflation and interest rate which represent the economic situation of the countries. The excessive return is used to measure the performance that is affected by the macroeconomic factors by setting a benchmark which will give an added value to the portfolio. Hence, the aim of this research is to review on the literature of the macroeconomic factors on excessive returns Asian REITs.

MACROECONOMIC IMPACT ON THE EXCESS RETURNS OF ASIAN REITS

The increasing development all over the world gives the real estate industry an opportunity to thrive which includes the REITs sector. Since the establishment of J-REITs in 2001, it has been growing rapidly across Asia. The IMF report showed that Asia continues to be the main growth engine of the world and is projected to grow in years to come. However, investors still remain cautious when dealing with Asian REITs because the markets are not established yet. Previous studies have proved that Asian REITs is able to show competitive advantage in most of mixed-asset scenarios and have significant roles in improving efficient global REITs portfolio returns. Since real estate is an essential part of the economy, its returns are related to the macroeconomic factors such as inflation and GDP. Excess return is used to measure the risk-adjusted performance by measuring how much risk from the macroeconomic factors is involved in producing that return. Hence, the aim of this paper is to evaluate the macroeconomic factors impact on the excess returns of Asian REITs. The data are retrieved from previous researches. The macroeconomic factors that impacted the returns are long term interest rates, short term interest rates, inflation, gross domestic product, construction index, industrial production, money supply, exchange rates and consumption risk. The excess return is found to be a good performance measurement in order for the investors to evaluate the expected returns before making an investment decision.

The Volatility Dynamics of the Global REITs Market

This paper tries to estimate the dynamic linear latent factor model (DLLFM) with jump in order to find jump risk, heteroscedasticity and time varying correlations in Global REITs Markets. Using five major Global Reits rates such as the United States, Japan, the United Kingdom, Australia and Hong Kong form January 4, 2000 to June 29, 2018, this study finds the evidence of common factor and time-varying correlations in addition to the country-specific idiosyncratic risk. According to the main estimated results of this paper, approximately 60% of the common factors of global REITs market risk. Can be explained by global stock markets. Second, REITs market integration among five countries seems to have been increasing gradually since Global Financial Crisis.

On the global integration of REITs market returns: A multiresolution analysis

This paper explores dynamic correlation and interdependence of five global REIT markets using multivariate wavelet methods. United States, Hong Kong, Belgium, South Africa and Australia’s daily REI...

Forecasting REIT volatility with high-frequency data: a comparison of alternative methods

ABSTRACTVolatility is a crucial input for many financial applications, including asset allocation, risk management and option pricing. Over the last two decades the use of high-frequency data has greatly advanced the research on volatility modelling. This article makes the first attempt in the real estate literature to employ intraday data for volatility forecasting. We examine a wide range of commonly used methods and apply them to several major global REIT markets. Our findings suggest that the group of reduced form methods deliver the most accurate one-step-ahead forecast for daily REIT volatility. They outperform their GARCH-model-based counterparts and two methods using low-frequency data. We also show that exploiting intraday information through GARCH does not necessarily yield incremental precision for forecasting REIT volatility. Our results are relatively robust to the choice of realized measure of volatility and the length of evaluation period.

The significance and performance of UK-REITs in a mixed-asset portfolio

Purpose UK-Real Estate Investment Trusts (REITs) are an important property investment vehicle, being the fourth largest REIT market globally. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of UK-REITs in a mixed-asset portfolio over 2007−2014. The post-global financial crisis (GFC) recovery of UK-REITs is highlighted. Design/methodology/approach Using total monthly returns, the risk-adjusted performance and portfolio diversification benefits of UK-REITs over 2007–2014 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of UK-REITs in a mixed-asset portfolio. Sub-period analysis is used to assess the post-GFC recovery of UK-REITs. Findings UK-REITs delivered poor risk-adjusted returns compared to UK stocks over 2007–2014 with limited portfolio diversification benefits. However, since the GFC, UK-REITs have delivered strong risk-adjusted returns, but with continued limited portfolio diversification benefits with UK stocks. Importantly, this sees UK-REITs as strongly contributing to the UK mixed-asset portfolio across the portfolio risk spectrum in the post-GFC environment. Practical implications UK-REITs are a significant market at a European and global REIT level. The results highlight the major role of UK-REITs in a UK mixed-asset portfolio in the post-GFC context. The strong risk-adjusted performance of UK-REITs compared to UK stocks sees UK-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as many investors (e.g. small pension funds, defined contribution [DC] funds) use UK-REITs to obtain their property exposure in a liquid format, as well as the increased importance of blended property portfolios of listed property and direct property. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance of UK-REITs and the role of UK-REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of UK-REITs in a portfolio.