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Empirical_Investigation_on_the_Performance_of_the_Malaysian_Real_Estate_Investment_Trusts_in_Pre-Cri

Empirical_Investigation_on_the_Performance_of_the_Malaysian_Real_Estate_Investment_Trusts_in_Pre-Cri

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International Journal of Economics and Finance www.ccsenet.org/ijef 62 Empirical Investigation on the Performance of the Malaysian Real Estate Investment Trusts in Pre-Crisis, During Crisis and Post-Crisis Period Ahmad Husni Hamzah Department of Finance and Banking Faculty of Business Management and Accountancy University Darul Iman Malaysia, KUSZA Campus, 21300 Kuala Terengganu, Malaysia Tel: 60-9-665-3790 E-mail: [email protected] Mohammad Badri Rozali College of Business University Utara Malaysia, 06010 Sintok, Kedah Darul Aman Tel: 60-4-928-6401 E-mail: [email protected] Izah Mohd Tahir (Corresponding Author) Department of Finance and Banking Faculty of Business Management and Accountancy University Darul Iman Malaysia, KUSZA Campus, 21300 Kuala Terengganu, Malaysia Tel: 60-9-665-3863 E-mail: [email protected] Abstract This study examines the performance of Real Estate Investment Trusts (REITs) or listed property trusts in Malaysia using three standard performance measurement methods (Sharpe Index, Treynor Index and Jensen Index) for 1995 to 2005. In addition, it investigates the degree of systematic risks of REITs and to determine whether REITs give higher returns than the market portfolio. The results indicate that the risk-adjusted performance of REITs vary over time. REITs in general outperformed the market portfolio during the 1997-1998 financial crisis but underperformed in the pre-crisis (1995-1997) and post-crisis period (1998-2005). This study also found that the average systematic risks of REITs were slightly higher than the market portfolio during the pre-crisis and crisis period but were significantly lower in the post-crisis period. Keywords: Real Estate Investment Trusts, Risk-adjusted Performance, Systematic Risk, Malaysia 1. Introduction Real estate investment trusts or REITs are collective investment schemes where funds are pooled and primarily invested in real estate assets and other real estate related assets. Real estate assets may consist of residential or commercial buildings, retail or industrial lots, lodgings/resorts, hospitals/health care facilities, self-storage facilities and specialty-built buildings. Examples of real estate related assets are shares in public-listed property companies and listed or unlisted debt securities of property companies. Subject to the investment limits prescribed by a regulatory body, REITs are also permitted to invest in non-real estate related assets, asset-backed securities and liquid assets. REITs, which may be listed or unlisted, generate investment returns from the rental income collected from tenants plus any capital appreciation arising from holding the real estate over the period. Investors in REITs, called unit holders, receive their returns in the form of dividends and/or capital gains for the holding period.
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