Macroeconomic Impact on the Excess Returns of Asian Reits

Abstract

The increasing development all over the world gives the real estate industry an opportunity to thrive which includes the REITs sector. Since the establishment of J-REITs in 2001, it has been growing rapidly across Asia. The IMF report showed that Asia continues to be the main growth engine of the world and is projected to grow in years to come. However, investors still remain cautious when dealing with Asian REITs because the markets are not established yet. Previous studies have proved that Asian REITs is able to show competitive advantage in most of mixed-asset scenarios and have significant roles in improving efficient global REITs portfolio returns. Since real estate is an essential part of the economy, its returns are related to the macroeconomic factors such as inflation and GDP. Excess return is used to measure the risk-adjusted performance by measuring how much risk from the macroeconomic factors is involved in producing that return. Hence, the aim of this paper is to evaluate the macroeconomic factors impact on the excess returns of Asian REITs. The data are retrieved from previous researches. The macroeconomic factors that impacted the returns are long term interest rates, short term interest rates, inflation, gross domestic product, construction index, industrial production, money supply, exchange rates and consumption risk. The excess return is found to be a good performance measurement in order for the investors to evaluate the expected returns before making an investment decision.

Analysing the relationship between global REITs and exchange rates: Fresh evidence from frequency-based quantile regressions

“…In particular, Nyakabawo et al (2018) examined the surprise impact of U.S. monetary policy and macroeconomic variables on the returns and volatility of the local housing market. While macroeconomic surprises did not affect housing returns, monetary policy had a much greater impact on returns across different periods (see also, Wang & Hartzell, 2020;Feng & Wu, 2021;Marfatia et al, 2021;Cohen & Burinskas, 2020;Mansur et al, 2020;Wang & Zong, 2020;Victor & Razali, 2019;etc.). According to Aye and Gupta (2019), even macroeconomic uncertainties can influence buying versus renting in the United States, affecting the performance of REITs.…”