Does Malaysian REITs outperform the equity market?

The objective of this study is to evaluate the overall performance of REITs in Malaysia against Kuala Lumpur Composite Index (KLCI) by using Sharpe and Treynor Ratios, Jensen's Capital Asset Pricing Model (CAPM), Fama-French 3-Factor CAPM as well as Carhart 4-Factor CAPM. The data consist of 14 REITs in Malaysia while the risk free rate is represented by the yield on the 3-month Treasury bills. The alpha values obtained from each evaluation model are then regressed against expense ratio, net asset value, management years of tenure and fund turnover to evaluate the relationship between risk-adjusted performance and fund characteristics. The result indicates that Malaysian REITs outperform the market index. The positive alpha values under CAPM methods denote that investors are earning a significant return after accounting for market risk. As for fund characteristics, the findings show that the risk-adjusted return is negatively related to net-asset value (fund size) and also turnover but not related to expenses and management tenure.