Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/223997
Title: RETURN SENSITIVITY OF MALAYSIAN REITS: FAMA AND FRENCH MODELS AND MACROECONOMIC FACTORS
Authors: CHEN JIA DING
Keywords: Real Estate
RE
Masaki Mori
2016/2017 RE
Economic Uncertainty
Fama and French Models
Malaysian REITs
Macroeconomic Factors
Performance Benchmarks
Political Uncertainty
Return Sensitivity
Issue Date: 3-May-2017
Citation: CHEN JIA DING (2017-05-03). RETURN SENSITIVITY OF MALAYSIAN REITS: FAMA AND FRENCH MODELS AND MACROECONOMIC FACTORS. ScholarBank@NUS Repository.
Abstract: This paper seeks to examine the return sensitivity of M-REITs to the Fama and French Models and other macroeconomic variables. A test of sensitivity is conducted on the Fama and French Three-factor Model and Fama and French Five-factor Model by making alterations to the variables used in these two models. The FF5M as the base model for the purpose of this study is also tested for the M-REIT return sensitivity in the face of economic and political uncertainty. The M-REIT returns are also tested for sensitivity towards macroeconomic state variables. Finally, the returns are tested against generally accepted REIT performance benchmarks to determine if the FF5M in the M-REIT context can be further improved with additional quality factors. The results indicate that M-REIT returns are sensitive to more variables in the FF5M, but the sensitivity differs when the benchmark market and returns are altered. In periods when the economic environment is uncertain, the Investment Premium turns from a risk factor to a quality factor. When a political uncertainty occurs during an economic uncertainty, the focus shifts to the Value Premium. The regression results indicate that in the macroeconomic space, M-REIT returns are only sensitive toward the national inflation rates and Overnight Policy Rate. M-REIT returns are sensitive to all three of the proposed REIT performance benchmarks, which are Weighted Average Cost of Capital, Leverage Ratio and Free Cash Flow Margin.
URI: https://scholarbank.nus.edu.sg/handle/10635/223997
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