The Relative Performance of Debt-restricted Real Estate Investment Trusts (REITs): Does Faith Matter?

M. Kabir Hassan, Yasser Alhenawi and Hesham Merdad

No 2011-WP-16, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: Ibrahim & Ong (2008) use operational restrictions of Islamic Investment Guidelines and conduct a thought experiment on Real Estate Investment Trusts (REITs) under restricted and non-restricted schemes. We use financial restriction and reach somewhat different results. Compliant REITs underperform non-compliant REITs in equally-weighted portfolios. However, the results are inversed in value-weighted portfolios. In the latter case, compliant REITs outperform non-compliant REITs and provide a less volatile investment vehicle. More interestingly, during the recent financial crisis, compliant REITs generated higher gains in equally-weighted portfolios and lower losses in value-weighted portfolios. Yet, there is no difference between the restricted and non-restricted portfolios when broader economic factors are included in the research.

Keywords: Real Estate Investment Trusts; Ethical Investing; Carhart Four-Factor Model (search for similar items in EconPapers)
JEL-codes: G12 G20 G23 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-07
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