Syariah REITs Vis-A-Vis Conventional REITs: An Analysis

The development of Islamic capital market products has been highly innovative in Malaysia as has pioneered various innovative Syariah compliant products over the past few years. Of importance is the introduction of the first Syariah real estate investment trusts (S-REITs). In November 2005, The Malaysian Government through the Securities Commission (SC) of Malaysia has issued the Guidelines for Islamic Real Estate Investment Trusts (S-REITs. Thus it provides new investment opportunity for investors who wish to invest in real estate through Syariah-compliant capital market instruments. Based on this strategic difference, the purpose of this paper is to provide an understanding on the performances of these two natures of REITs in the Malaysian capital market, namely conventional REITs (C-REITs) and Syariah REITs by comparing the risk and return of S-REITs and C-REITs from Malaysia perspective. The secondary data for analysis is retrieved from Bloomberg’s Database of 12 listed REITs in the Bursa Malaysia main board for three year period from 2007 to 2009 with quarterly observation. Sharpe Index, Jensen Index and Treynor Index are used as a proxy to the return of REITs, while beta, standard deviation and coefficient of variation are used as a proxy to represent REITs’s risk. Applying correlations and independent sample t-test, the result has provided evidence on the association between return and risk on REITs.