Market reaction to overseas transactions of Singapore Real Estate Investment Trusts

Abstract

Singapore Real Estate Investment Trusts (REITs) have been aggressively expanding overseas to enhance portfolio returns and increase their attractiveness to investors. However, there is little empirical evidence on market reaction towards purchase and divestment decision to guide investors and fund managers in future expansion strategy. This dissertation aims to bridge to gap in literature by examining investors’ reactions to news of changes in portfolio composition with abnormal return as an indicator. Using standard event study methodology, the study finds an overall significant positive reaction to news of overseas transactions. Also, significant positive abnormal returns are observed for each of the acquisition and divestment event categories. The finding is consistent with theory supporting positive reaction to disposal events that increase geographical focus while it challenges existing diversification discount for overseas expansion for Singapore REITs.