REITS AND INTEREST RATE SENSITIVITY: EVIDENCE FROM THE SINGAPORE MARKET

Abstract

This study will examine the relationship between the sensitivity of Reit returns to interest rate changes. Furthermore, the study will evaluate the relationship between Reit reported interest rate sensitivity and actual Reit interest rate and market return sensitivity. Using daily returns of Singapore Reits (S-Reits) from 2008 to 2013, the results from the Ordinary Least Squares (OLS) regression shows consistency with empirical evidence. The results suggest that Reits have a negative and significant relationship with changes in long-term interest rates. For the second research objective, a total of 18 S-Reits from 2008 to 2013 is examined using a Fixed Effects Panel Regression technique. The results from the model estimation suggest that an increase in the reported sensitivity of Reits will increase the actual Reit market return and interest rate sensitivity.