The Long - Run Dynamics between Direct and Securitized Real Estate

Oikarinen, Elias; Hoesli, Martin; Serrano, Camilo

doi:10.1080/10835547.2011.12091299

Cited by 96 publications

(46 citation statements)

References 32 publications

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“…direct investment, non-listed funds) as Mexico REITs are listed on the stock market and are therefore being continually priced in the capital market. However, several studies have empirically established the convergence of returns in the long-term horizon between REITs and direct commercial property (see Boudry et al, 2012;Hoesli and Oikarinen, 2016;Hoesli et al, 2015;Ling and Naranjo, 2015;Oikarinen et al, 2011;Yunus et al, 2012), highlighting the need to consider Mexico REITs as a long-term investment in order to be able to fully appreciate their underlying commercial property investment qualities.…”

Section: Diversification Benefitsmentioning

confidence: 99%

“…With several studies having empirically established the convergence of returns in the long term between REITs and direct commercial property (see Boudry et al, 2012;Hoesli and Oikarinen, 2016;Hoesli et al, 2015;Ling and Naranjo, 2015;Oikarinen et al, 2011;Yunus et al, 2012), this further highlights the importance of the need to consider REITs as a property investment opportunity in order to be able to obtain the underlying commercial property investment performance features in the longer term, with the added investment feature of liquidity.…”

Section: Introductionmentioning

confidence: 97%

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The investment attributes of Mexico REITs as a listed property investment vehicle

Marzuki

Newell

2020

JPIF

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PurposeMexico REITs are a significant and important REIT market, both in a regional and in emerging property market context. As one of the few emerging economies in the world with an active REIT market, Mexico REITs are specifically designed to provide an effective pathway to participate in the investment opportunities offered by the Mexico commercial property market for both domestic and international investors. Importantly, Mexico REITs provide additional property investment benefits such as a high degree of transparency, governance and liquidity. The main focus of this research is to highlight the significance of Mexico REITs and assess their performance dynamics, as well as the added-value benefits of Mexico REITs in mixed-asset investment portfolios.Design/methodology/approachUsing monthly total returns, the risk-adjusted performance and portfolio diversification potential of Mexico REITs over April 2011–December 2019 were assessed. A constrained mean-variance portfolio optimisation framework was used to develop a three-asset portfolio scenario using the historical returns, risk and correlation of Mexico REITs and the other two major financial assets.FindingsDespite being more volatile than the mainstream asset classes, Mexico REITs delivered the strongest risk-adjusted performance versus stocks and bonds over April 2011–December 2019, which was made possible by the high premium of their total return performance. Notably, Mexico REITs offered excellent diversification potential with bonds, whilst demonstrating a marginal positive correlation with the stock market. These investment attributes of Mexico REITs have brought immediate benefits towards their ability to add value to the Mexico mixed-asset portfolio fabric across a wide portfolio risk–return spectrum.Practical implicationsWhilst their initial establishment in 2004 was considered unsuccessful, the ongoing regulatory improvements have been pivotal in providing a supportive investment environment to nurture the organic growth of Mexico REITs. This now sees the Mexico REIT market as an exemplar of success for REIT establishments amongst its peers in the Latin American region, as well as for emerging economies worldwide. Mexico REITs are now an important REIT market, as the second largest emerging REIT market in the world. The empirical investigation of this research has established the investment attributes of Mexico REITs as a listed property investment vehicle. The strong risk-adjusted performance of Mexico REITs compared to stocks and bonds sees Mexico REITs contributing to the mixed-asset portfolio across the portfolio risk–return spectrum. This is particularly important as it provides insights into the broader strategic implications of Mexico REITs as an effective, transparent and tax-efficient conduit for high-quality Latin American property exposure in a liquid format.Originality/valueThis paper is the first published empirical research that elucidates the investment attributes of Mexico REITs, highlighting their significance, risk-adjusted and portfolio performance enhancement role as an emerging REIT market. The main outcome of this research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of Mexico REITs in an investment portfolio.

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Section: Diversification Benefitsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

The investment attributes of Mexico REITs as a listed property investment vehicle

Marzuki

Newell

2020

JPIF

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“…, where j is the jth day in quarter t. The sample covers the period from 1992Q1 to 2013Q3. The sample begins in 1992 after the REIT industry experienced significant changes in rules and regulations (Pagliari et al, 2005;Oikarinen et al, 2011).…”

Section: Methodsmentioning

confidence: 99%

Categorizing sentiment and its impact on REIT returns

Huerta

Jackson²,

Ngo

2015

Managerial Finance

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Purpose – The purpose of this paper is to reexamine the impact of investor sentiment on real estate investment trust (REIT) returns using direct, survey-based measures of sentiment to categorize sentiment from institutional and individual investors. Design/methodology/approach – The authors provide a framework in which sentiment is classified into individual and institutional investor sentiment under the assumption that investors, depending on sophistication, react differently to the same set of information and will influence REIT prices differently. The authors employ a methodology that uses panel regression analyses and divides the sample of REITs into size and performance portfolios. Findings – The regression results suggest that institutional investor sentiment is positively and significantly related to REIT returns contemporaneously for multiple sample specifications. These results are consistent with high levels of institutional ownership in REITs. Results also suggest that individual investor sentiment only influences small capitalization and low-α portfolios. Originality/value – The findings provide more evidence on the influence of investor sentiment on security pricing even for highly regulated sectors such as the REIT industry. Investors may use changes in sentiment as signals for portfolio rebalancing and capital allocations.

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“…The differences between "vintage" REITs and "modern" REITs are well documented in the literature. For examples, see Ott et al (2005) for a discussion of investment performance, Oikarinen et al (2011) which notes the changes in the relationship between the NAREIT and NCREIF indices, Chiang (2010) which considers the co-movement of prices for REITs specializing in different property types and Hardin and Wu (2010) who investigate changes in capital structure and the increase in banking relationships in the new REIT era.…”

Section: Notesmentioning

confidence: 99%

Valuation effects of REIT mergers and the role of diversification

Alexander

Springer

2018

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Purpose Merging two real estate investment trusts (REITs) consolidates two real estate portfolios. The purpose of this paper is to provide further evidence on the market’s valuation of property type and geographic diversification of REITs by looking at the diversification impact of mergers involving domestic REITs in the Modern REIT era (post 1992). Design/methodology/approach The authors classify equity REIT mergers according to whether they maintain portfolio focus or alter their focus with respect to the geography and property type distribution of the underlying real estate. Then, using a domestic REIT index, the authors examine abnormal returns around the merger announcement to ascertain how portfolio changes affect value. Findings Although the results show no abnormal returns to the combined REIT for the 126 mergers in the sample, mergers that maintain geographic focus and alter the property focus contribute positively to the abnormal returns. Acquiring REITs show negative abnormal returns for mergers that either diversify geography or maintain property focus. Target REITs earn positive abnormal returns no matter the diversification impact of the merger. Research limitations/implications The results suggest that changes to the composition of the REIT’s property portfolio have valuation implications. The results suggest that during the modern REIT Era, property diversification created positive wealth effects for the acquirer. Originality/value This research adds to the evidence on how REIT investors value changes in the diversification of the underlying properties, and implies that the investor perception of portfolio effects from mergers may vary over time as the REIT industry expands and consolidates.

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The Long - Run Dynamics between Direct and Securitized Real Estate

Cited by 96 publications

References 32 publications

The investment attributes of Mexico REITs as a listed property investment vehicle

The investment attributes of Mexico REITs as a listed property investment vehicle

Categorizing sentiment and its impact on REIT returns

Valuation effects of REIT mergers and the role of diversification

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