Islamic REIT response to macroeconomic factors: a markov regime switching auto regressive approach

Shahidah Nailul Morad and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: This paper intends to compare the returns of shariah-compliant (Islamic) REITs with non-shariah compliant REITs listed on the London Stock Exchange, Singapore Stock Exchange and Kuala Lumpur Stock Exchange (Malaysia) against the movement of US inflation and interest rates. A Markov regime switching auto regressive model is applied to capture the unobserved component present in the market during the sample period. The results tend to provide empirical evidence that while there exist different regimes in all three markets, the regimes for shariah compliant REITs on LSE is not well defined. Meanwhile the returns of shariah-compliant REITs are lower compared to non-shariah compliant REITs with US interest rates being significant in all three markets but US inflation rates significantly affecting only the LSE and SGX REITs.

Keywords: Shariah (Islamic) REIT Index; diversification; Markov regime switching (search for similar items in EconPapers)
JEL-codes: C22 C58 G11 (search for similar items in EconPapers)
Date: 2015-06-25
New Economics Papers: this item is included in nep-sea
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