Diversification benefit and return performance of REITs using CAPM and Fama-French: Evidence from Turkey


Coskun Y., Selcuk-Kestel A. S. , Yılmaz B.

BORSA ISTANBUL REVIEW, vol.17, no.4, pp.199-215, 2017 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 17 Issue: 4
  • Publication Date: 2017
  • Doi Number: 10.1016/j.bir.2017.08.003
  • Journal Name: BORSA ISTANBUL REVIEW
  • Journal Indexes: Social Sciences Citation Index, Emerging Sources Citation Index, Scopus, EconLit, Directory of Open Access Journals
  • Page Numbers: pp.199-215
  • Keywords: REIT, CAPM, Fama-French model, Turkish REITs, Borsa Istanbul, ESTATE INVESTMENT TRUSTS, COMMON RISK-FACTORS, REAL-ESTATE, MARKET, TIME, STOCKS, PERSPECTIVE, BONDS

Abstract

This paper analyzes return enhancement patterns of Turkish REITs (T-REITs) from various perspectives over the period of July 2008 and March 2015. We find that T-REITs portfolio provides a slightly lower level of risk diversification benefit than investment trusts, but higher than the banks. The evidence suggests that portfolio managers and investors may not only be able to utilize knowledge deriving from the CAPM, but also utilize information retrieved from Fama-French model due to its relatively better performance on capturing the variation in T-REITs returns. Results also disclose that T-REITs show a degree of diversity in property focus, and reveal mainly defensive, small and financially distressed characteristics. Finally, based on the multiple observations, a case can be made for a possible linkage between property focus and yield improvement/risk taking structure of T-REITs. This study provides implications for the capacity of T-REITS and improve return enhancement capacity in an efficient portfolio management. Copyright (c) 2017, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B. V. This is an open access article under the CC BY-NCND license