Risk and return analysis of tax adjusted versus unadjusted REITS indexes and other financial indexes

• Main Author: Chunya, Ma
• Format: Thesis
• Language: English; English
• Published: 2015
• Subjects: HG Finance
• Online Access: http://etd.uum.edu.my/5548/
• Institution: Universiti Utara Malaysia

This study develops the tax adjusted and unadjusted Malaysian real estate investment trusts (REITs) indexes based on the value weighted approach by using a monthly data of 19 Malaysian REITs from January 1999 to December 2014. It also investigates the performance of the tax adjusted versus unadjusted Malaysian REITs indexes and other financial indicators, and diversification benefit of the Malaysian REITs, Kuala Lumpur Composite Index (KLCI), Kuala Lumpur Property Index (KLPI) and Malaysia 3-month Treasury bills based on the Markowitz’s modern portfolio theory. The study finds that the tax adjusted REITs index outperforms the unadjusted REITs index, KLCI and KLPI based on the coefficient of variation (CV). The Malaysia 3-month T-bills provides the lowest CV and it is considered to be the best performing asset for risk averse investors. Furthermore, Malaysian REITs are found to have a lower positive correlation with the KLCI than the KLPI, indicating that it has a higher diversification benefit. Malaysia 3-month Treasury bills are negatively correlated with the other financial indicators