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The Role of REIT Dividend Policy on Ex-Ante Portfolio Allocation

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  • Metin İlbasmiş

    (Aksaray University, Türkiye)

Abstract

To test the diversification benefits of REIT sub-groups formed based on dividend payout ratios, we forecast ex-ante variance-covariance matrices using a rolling window correlation and a DCC model. Regression-based mean-variance spanning tests, mean-variance efficient frontiers, and a minimum variance portfolio allocation approach using ex-ante optimization frameworks are considered. A major finding of the current study is the dividend payout ratios of REITs affect REIT market diversification benefits. Apart from extending stock market index investors' investment universe and providing more efficient (higher profitability and/or lower risk) portfolios, REITs offer diversification benefits directly related to dividend policies. A unique level of diversification is attained by classifying REITs based on their dividend payout ratios. As well, these REIT sub-groups are capable of left-shifting the efficient frontier of a market portfolio with either of the REIT sub-groups.

Suggested Citation

  • Metin İlbasmiş, 2025. "The Role of REIT Dividend Policy on Ex-Ante Portfolio Allocation," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 11(1), pages 39-66.
    • Handle: RePEc:men:journl:v:11:y:2025:i:1:p:39-66
    DOI: 10.11118/ejobsat.2025.002
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    More about this item

    Keywords

    DCC; REITs; correlation; dividend policy; portfolio optimization; estimation; forecasting;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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