INVESTMENT ANALYSIS ON DIRECT PROPERTIES, REITS AND LISTED REAL ESTATE COMPANIES IN SINGAPORE

Abstract

This paper aims to investigate the investment performance of direct properties and property stocks (20 REITs and 31 listed real estate companies) in Singapore as well as the impact of Asian Financial Crisis (AFC), Global Financial Crisis (GFC) and European Debt Crisis (EDC) on their performances. Evaluation of the investment performance is based on eight performance measures: Return, Risk, Coefficient of Variation (CV), Sharpe Ratio (SR), modified Sharpe Ratio (mSR), Beta, Treynor Index (TI) and Jensen Index (JI), they were conducted to understand how performance of Singapore direct and indirect real estate changed over long-term and short-term periods. Also, Granger causality test was employed to examine the linkages between direct property market, property stock market and the stock market. The findings conclude that direct properties have performed better property stocks and the stock market on a risk-adjusted return basis and performed exceptionally well during GFC, and industrial properties displayed superior returns and risk-adjusted. Property stocks recovered rapidly after each crisis and outperformed other sectors. Findings of this paper also display that risk-adjusted investment performance for listed real estate companies is superior to performance for REITs, and performance of property stocks led direct real estate performance during the crisis period, no significant linkages between the direct property sectors and the stock market performance significantly driven real estate market for all periods.