The Determinants of Malaysian Real Estate Investment Trusts’ Systematic Risks

Abstract

Research Question: The paper investigates the influence of firm performance, market performance, inflation, and economic growth on systematic risk within Malaysian Real Estate Investment Trusts (M-REITs). Motivation: The study aims to understand how firm performance, market performance, inflation, and economic growth collectively impact systematic risk within M-REITs. The novelty of this study lies in its focus on the Malaysian context and the specific examination of M-REITs, contributing to a limited body of research on systematic risk in emerging markets. Understanding these dynamics is crucial for investors, stakeholders, and policymakers to make informed decisions and enhance risk management strategies in the M-REIT sector. Idea: This paper analysed the impact of firm performance, market performance, inflation, and economic growth on systematic risk within M-REITs using panel data analysis. The central hypothesis is that factors such as Return on Asset (ROA), stock market indices, inflation, and economic growth significantly influence the systematic risk of M-REITs, with ROA playing a crucial role in shaping the overall risk profile of M-REITs. Data: This paper examined financial data from 17 REITs listed on the Bursa Malaysia exchange from 2017 Q1 to 2021 Q4. using quarterly reports from each company and macroeconomic data from the Department of Statistics Malaysia and S&P Global 500 for the same period. Method/Tools: The study utilised a panel data analysis approach, specifically Pooled Ordinary Least Square (OLS) regression. Findings: The key findings of the study reveal a significant and positive relationship between firm performance, stock market indices, inflation, and systematic risk within MREITs. This aligns with the principles of the Capital Asset Pricing Model (CAPM). Contributions: This paper contributes to the literature by demonstrating the significant influence of firm performance, market performance, inflation, and economic growth on systematic risk within MREITs, providing valuable insights for risk management strategies and decision-making in the M-REIT market