The role of Malaysian securitised

The role of Malaysian securitised - The role of Malaysian...

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Unformatted text preview: The role of Malaysian securitised real estate in a mixed-asset portfolio Chyi Lin Lee School of Economics and Finance, University of Western Sydney, South Penrith, Australia, and Kien Hwa Ting Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA, Shah Alam, Malaysia Abstract Purpose – Previous studies on the Malaysian securitised real estate market have largely emphasised on performance analysis, whereas the importance of securitised real estate in asset allocation is largely ignored. Therefore, the purpose of this paper is to examine the role of Malaysian property shares and real estate investment trusts (REITs) in a mixed-asset portfolio from 1991 to 2006. Design/methodology/approach – The mean-variance and downside risk optimisations were utilised to assess the role of REITs and property shares in a mixed-asset portfolio allocation. More specifically, the portfolio diversification potential and return enhancement benefits for both assets were examined. Findings – The results showed that property shares offer little diversification benefits or portfolio return enhancement, whereas the equally weighted REITs portfolio does provide some diversification benefits and return enhancements under the mean-variance and downside risk frameworks. However, the benefits have diminished in recent years. Besides, the results also revealed that the equally- and value-weighted REIT portfolios do behave differently. Research limitations/implications – This study has several important implications for investors. Importantly, investors should consider the inclusion of REITs rather than property shares in their portfolios. Originality/value – This paper is one of few studies in emerging markets, although Malaysia was the first country to introduce REITs in Asia. Additionally, it could be the first attempt to assess the downside risk of Malaysian securitised real estate. Keywords Assets, Real estate, Property, Shares, Malaysia Paper type Research paper 1. Introduction The securitised real estate market in Malaysia is largely dominated by listed property companies (or known as property shares) and real estate investment trusts (REIT; formerly known as listed property trusts (LPTs)). As at 16 December 2007, there are 99 listed property companies and 13 REITs listed on Bursa Malaysia. As an emerging securitised real estate market, the size of the Malaysian securitised real estate market is relatively small in comparison to other developed markets. Despite Malaysia being The current issue and full text archive of this journal is available at www.emeraldinsight.com/1366-4387.htm The authors would like to thank Professor Eddie Hui (the Guest Editor) and the comments from anonymous referees and participants of the 14th Pacific Rim Real Estate Society Conference....
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The role of Malaysian securitised - The role of Malaysian...

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