Home • PRRES Inc. Journal • Read the Journal

The dynamic of linkages of Islamic REITs in mixed-asset portfolios in Malaysia

Author/s: Ahmad Tajjudin Rozman, Muhammad Najib Razali, Nurul Afiqah Azmi, Hishamuddin Mohd. Ali

Date Published: 1/09/2016

Published in: Volume 22 - 2016 Issue 3 (pages 245 - 265)

Abstract

Islamic REIT (I-REITs) were introduced to the Malaysian stock market approximately ten years ago. This paper assesses dynamic linkages by using the Granger causality test of I-REITs. The study period is from 2008 to 2014. The study concentrates on comparisons between I-REITs and conventional REITs (C-REITs) and provides a better overview of comparisons and linkages of both asset classes. A Cointegration Test determined that a mixed-asset portfolio is cointegrated and shows less diversification benefits between the mixed-asset portfolios. The Granger causality test results has identified that industry portfolio can cause Granger I-REITs’ returns to change. This further confirms that I-REITs have good potential to diversify within any asset classes, including shares and bonds.

Download Full Article

Download the Full Article PDF

14445921.2016.1235758.pdf 14445921.2016.1235758.pdf (2MB)

Keywords

Islamic Reits - Linkages - Malaysia - Reits

References

  • Akinsomi, O.Ong, S. E.Ibrahim, M. F.Newell, G. (2014) The idiosyncratic risks of a Shariah compliant REIT investor, Journal of Property Research. 31, p:211-243. Journal of Property Research.
  • Allen, M. T.Madura, J.Springer, T. M. (2000) REIT characteristics and the sensitivity of REIT returns, The Journal of Real Estate Finance and Economics. 21, p:141-152. The Journal of Real Estate Finance and Economics.
  • Assaf, A. (2016) MENA stock market volatility persistence: Evidence before and after the financial crisis of 2008, Research in International Business and Finance. 36, –.p:222-240. Research in International Business and Finance.
  • Basse, T.Friedrich, M.Bea, E. V. (2009) REITs and the financial crisis: Empirical evidence from the US, International Journal of Business and Management. 4, p:3-10. International Journal of Business and Management.
  • Coëna, A.Lecomteb, P. (2014) Another look at Asian REITs performance after the global financial crisis, Handbook of Asian Finance: REITs, Trading, and Fund Performance. 2, p:69-94. Handbook of Asian Finance: REITs, Trading, and Fund Performance.
  • Downs, D. H.Fung, H. G.Patterson, G. A.Yau, J. (2003) The linkage of REIT income- and price-returns with fundamental economic variables, The Journal of Alternative Investments. 6, p:39-50. The Journal of Alternative Investments.
  • Dusuki, A. W. (2008) Understanding the objectives of Islamic banking: A survey of stakeholders’ perspectives, International Journal of Islamic and Middle Eastern Finance and Management. 1, –.p:132-148. International Journal of Islamic and Middle Eastern Finance and Management.
  • EPRA. (2009) Monthly statistical bulletin. Brussels:European Public Real Estate Association. Monthly statistical bulletin.
  • Glascock, J. L.Lu, C.So, R. W. (2000) Further evidence on the integration of REIT, bond, and stock returns, The Journal of Real Estate Finance and Economics. 20, p:177-194. The Journal of Real Estate Finance and Economics.
  • Granger, C. W. (1988) Some recent development in a concept of causality, Journal of Econometrics. 39, –.p:199-211. Journal of Econometrics.
  • Inclan, C.Tiao, G. C. (1994) Use of cumulative sums of squares for retrospective detection of changes of variance, Journal of the American Statistical Association. 89, p:913-923. Journal of the American Statistical Association.
  • Johansen, S. (1988) Statistical analysis of cointegration vectors, Journal of Economic Dynamics & Control. 12, –.p:231-254. Journal of Economic Dynamics & Control.
  • Johansen, S.Juselius, K. (1994) Identification of the long-run and the short-run structure an application to the ISLM model, Journal of Econometrics. 63, p:7-36. Journal of Econometrics.
  • Kilian, L.Diebold, F. X. (1999) Unit root tests are useful for selecting forecasting models. Cambridge: National Bureau of Economic Research. Unit root tests are useful for selecting forecasting models.
  • Koh, C. C. F.Lee, D. K. C.Phoon, K. F.Seah, E. S. (2014) Market structure and growth potential of Singapore REITs, Handbook of Asian Finance: REITs, Trading, and Fund Performance. 2, p:53-67. Handbook of Asian Finance: REITs, Trading, and Fund Performance.
  • Li, D. D.Yung, K. (2007) REIT returns: Between the Pacific and the Atlantic, Review of Accounting and Finance. 6, p:353-369. Review of Accounting and Finance.
  • Lean, H. H.Smyth, R. (2012) REITs, interest rates and stock prices in Malaysia, International Journal of Business and Society. 13, p:1-11. International Journal of Business and Society.
  • Lee, S. L. (1998) The case for property in the long-run: A cointegration test. Reading: (1998Working paper 06/98. Department of Land Management. The case for property in the long-run: A cointegration test.
  • Lee, C.L.Ting, K.H. (2009) The role of Malaysian securitised real estate in a mixed-asset portfolio, Journal of Financial Management of Property and Construction. 14, p:208-230. Journal of Financial Management of Property and Construction.
  • Liow, K. H. (2001) The abnormal return performance of Singapore property companies, Pacific Rim Property Research Journal. 7, –.p:104-112. Pacific Rim Property Research Journal.
  • Liow, K. H. (2014) The dynamics of return co-movements and volatility spillover effects in Greater China public property markets and international linkages, Journal of Property Investment and Finance. 32, –.p:610-641. Journal of Property Investment and Finance.
  • Liow, K. H.Ye, Q. (2014) Switching volatility and cross-market linkages in public property markets, Journal of Property Research. 31, p:287-314. Journal of Property Research.
  • Liu, J.Loudon, G.Milunovich, G. (2011) Linkages between the US and Asia-Pacific REITs: The role of economic and financial factors, Available at SSRN 1895847. Available at SSRN 1895847.
  • Markowitz, H. (1952) Portfolio selection, The journal of finance. 7, –.p:77-91. The journal of finance.
  • MIFC. (2014) Islamic real estate and investment trusts (Islamic REITs) a promising asset class for wealth management,. Retrieved from http://www.mifc.com/?ch=28&pg=72&ac=60&bb=uploadpdf
  • Morad, S. N.Masih, M. (2015) Islamic REIT response to macroeconomic factors: A Markov regime switching auto regressive approach. Munich: No. 65237. University Library of Munich. Islamic REIT response to macroeconomic factors: A Markov regime switching auto regressive approach.
  • Nawawi, A. H.Husin, A.Hadi, A. R. A.Yahya, M. H. (2010) Relationship and lead-lag effect between Asian Real Estate Investment Trusts (REITs) performance and Malaysian REIT market: Cointegration modelling, Science and Social Research. p:522-527. Science and Social Research.
  • Newell, G.Osmadi, A. (2009) The development and preliminary performance analysis of Islamic REITs in Malaysia, Journal of Property Research. 26, p:329-347. Journal of Property Research.
  • Newell, G.Wen Peng, H.Yam, S. (2011) Assessing the linkages between corporate social responsibility and A-Reit performance, Pacific Rim Property Research Journal. 17, p:370-387. Pacific Rim Property Research Journal.
  • Osmadi, A. (2006) A guide to Islamic finance and Islamic REITs, Australian Property Journal. 39, –.p:212-218. Australian Property Journal.
  • Osmadi, A.Razali, M. N. (2015) Assessing the financial and management strength of Islamic Real Estate Investment Trusts (I-REITs) during the Global Financial Crisis (GFC), PERINTIS eJournal. 4, p:48-69. PERINTIS eJournal.
  • Pavlov, A. D.Wachter, S. M. (2011) REITs and Underlying Real Estate Markets: Is There a Link?, U of Penn, Inst for Law & Econ Research Paper. p:11-20. U of Penn, Inst for Law & Econ Research Paper.
  • Pham, A. K. (2011) The significance and performance of South Korean REITs in a mixed-asset portfolio, Journal of Real Estate Literature. 19, –.p:373-390. Journal of Real Estate Literature.
  • Razali, M. N. (2015) The significance and performance of Malaysian listed property companies in Pan-Asian property portfolios. Sydney.Doctoral dissertation. University of Western Sydney. The significance and performance of Malaysian listed property companies in Pan-Asian property portfolios.
  • Razali, M. N.Sing, T. F. (2015) Systematic risk of Islamic REITs and conventional REITs in Malaysia, Journal of Real Estate Portfolio Management. 21, p:77-92. Journal of Real Estate Portfolio Management.
  • Rozman, A. T.Azmi, N. A.Mohd Ali, H.Mohamed Razali, N. M. (2015) The performance and significance of Islamic REITs in a mixed asset portfolios, Jurnal Teknologi. 77, p:1-9. Jurnal Teknologi.
  • Sims, C. A. (1980) Macroeconomics and reality, Econometrica: Journal of the Econometric Society. 70, , –.p:1-48. Econometrica: Journal of the Econometric Society.
  • Siew, R. Y. J. (2015) Predicting the behaviour of Australian ESG REITs using Markov chain analysis, Journal of Financial Management of Property and Construction. 20, –.p:252-267. Journal of Financial Management of Property and Construction.
  • Subrahmanyam, A. (2007) Liquidity, return and order-flow linkages between REITs and the stock market, Real Estate Economics. 35, –.p:383-408. Real Estate Economics.
  • Ting, K. H.Noor, A. R. M. (2007) Islamic REITs: A Syariah-compliant investment option, July Paper presented at the Asian Real Estate Society Annual Conference, Macau, China.
  • Trust. (2008) Asia-Pacific REIT survey. Singapore:Trust. Asia-Pacific REIT survey.
  • Tsai, I. C. (2013) Volatility clustering, leverage, size, or contagion effects: The fluctuations of Asian real estate investment trust returns, Journal of Asian Economics. 27, –.p:18-32. Journal of Asian Economics.
  • Tsai, I. C.Lee, C. F. (2012) The convergent behavior in REIT markets, Journal of Property Investment & Finance. 30, p:42-57. Journal of Property Investment & Finance.
  • Vishwakarma, V. K.French, J. J. (2010) Dynamic linkages among macroeconomic factors and returns on the Indian real estate sector, International research journal of finance and economics. 43, p:151-166. International research journal of finance and economics.
  • ???, S. (2007) Real estate investment trusts (REITs) in China: With Hong Kong REITs as an approach (unpublished Doctoral Thesis), Hong Kong: ,.Hong Kong University.
  • Yong, J. L. (2013) Economic linkages between Australian REITs and the commerical real estate market. Retrieved fromEconomic linkages between Australian REITs and the commerical real estate market. Retrieved from http://ro.ecu.edu.au/theses/577
  • Yong, J. L.Singh, A. (2013) Interest rate sensitivities of externally and internally managed Australian REITs, MODSIM2013, 20th International Congress on Modelling and Simulation. Canberra: p:1319-1325. The Modelling and Simulation Society of Australia and New Zealand. MODSIM2013, 20th International Congress on Modelling and Simulation.
  • Yong, J. L. P. (2010) Integration of Stapled A-REIT, Stock and Bond Returns.November Paper presented at 23rd Australasian Finance and Banking Conference, Sydney. Integration of Stapled A-REIT, Stock and Bond Returns.
  • Zarebski, P. D. (2014) Agency issues surrounding A-REITS and the global financial crisis. Melbourne.No. Doctor of Philosophy. Deakin University. Agency issues surrounding A-REITS and the global financial crisis.
  • Zhou, J. (2012) Multiscale analysis of international linkages of REIT returns and volatilities, The Journal of Real Estate Finance and Economics. 45, –.p:1062-1087. The Journal of Real Estate Finance and Economics.
  • Zivot, E.Andrews, D. W. (2012) Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis, Journal of Business & Economic Statistics. 10, p:25-44. Journal of Business & Economic Statistics.