ISSN: 2222-6990
Open access
This study analyses the effectiveness of risk diversification and investment performance between M-REITs’ and J-REITs’ by comparing the diversification measures (unsystematic risk divided by total risk and one-minus R squared) including their respective Sharpe Ratio, Treynor Ratio and Jensen’s Alpha calculated on each REITs. The study period for M-REITs’ and J-REITs extends from 2008 to 2017. Results indicate that M-REITs’ performed better than J-REITs’ in terms of Sharpe ratio, Treynor ratio, and Jensen’s Alpha. Total risk of J-REITs’ are higher than M-REITs’. The Beta values for both M-REITs’ and J-REITs’ are less than one, implying that both categories of REITs are less risky than the market index. M-REITs’ have lower R-Squared values than S-REITs’, which suggest that M-REITs’ are poorly diversified against J-REITs’ and therefore, M-REITs’ have more diversification opportunities. The diversification measures computed for M-REITs’ are higher than J-REITs’ and would imply that M- REITs’ have better rate of returns if M-REITs’ diversify their risk (higher risk diversification benefits). The findings from this study aims to help investors to make better investment decision when investing in M-REITs’ and J-REITs’. The findings from this study aims to assist investors determine better investment decisions when considering investing in M-REITs’ and J-REITs’.
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In-Text Citation: (Ng et al., 2021)
To Cite this Article: Ng, D. C. Y., Lau, T. C., Shanmugaretnam, S., & Rahim, F. binti A. (2021). Investing in Real Estate Investments Trusts (REITs) Provides Performance and Risk Diversification Benefits: A Malaysia and Japan Analysis. International Journal of Academic Research in Business and Social Sciences, 11(6), 453–474.
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