RISKS AND RETURNS IN REGIONAL SECURITIZED REAL ESTATE-COUNTRY EFFECTS

Abstract

The Singapore real estate investment trust (REIT) market has experienced strong growth since its introduction in 2002. REIT companies are now looking into cross-border acquisitions as the next stage of their growth strategy. This study is concerned about the risk premiums involved in cross-border REIT acquisitions. Using the returns data of over 250 companies in 7 countries in Asia-Pacific, this study examines the 'country-effects' of Bond et al (2003) and compares the country-specific risk premiums of individual countries using the Fama-MacBeth 2 pass regression technique. This study also examines the effects on risk premiums when assets are allocated by size and beta. Findings show that the country-specific risk premiums of these 7 countries are significantly different. In addition, these country-specific risk-premiums are priced by size. The traditional evaluation by means of beta is no longer capable of explaining the average returns in this region. Finally, this report recommends the future research on country-specific risks that make use of multi-factor models.