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

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  • M. Kabir Hassan
  • Yasser Alhenawi
  • Hesham Merdad

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.

Suggested Citation

  • M. Kabir Hassan & Yasser Alhenawi & Hesham Merdad, 2011. "The Relative Performance of Debt-restricted Real Estate Investment Trusts (REITs): Does Faith Matter?," NFI Working Papers 2011-WP-16, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfiwps:2011-wp-16
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    References listed on IDEAS

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    1. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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    5. Fama, Eugene F & French, Kenneth R, 1995. "Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-155, March.
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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