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


  • Morad, Shahidah Nailul
  • Masih, Mansur


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.

Suggested Citation

  • Morad, Shahidah Nailul & Masih, Mansur, 2015. "Islamic REIT response to macroeconomic factors: a markov regime switching auto regressive approach," MPRA Paper 65237, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65237

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    References listed on IDEAS

    1. Alexis Guyot, 2011. "Efficiency and Dynamics of Islamic Investment: Evidence of Geopolitical Effects on Dow Jones Islamic Market Indexes," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(6), pages 24-45, November.
    2. Fatnassi, Ibrahim & Slim, Chaouachi & Ftiti, Zied & Ben Maatoug, Abderrazek, 2014. "Effects of monetary policy on the REIT returns: Evidence from the United Kingdom," Research in International Business and Finance, Elsevier, vol. 32(C), pages 15-26.
    3. Cetorelli, Nicola & Peristiani, Stavros, 2013. "Prestigious stock exchanges: A network analysis of international financial centers," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1543-1551.
    4. James E. Payne, 2006. "The response of sub-sector REIT returns to shocks in fundamental state variables," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(2), pages 71-75, March.
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    More about this item


    Shariah (Islamic) REIT Index; diversification; Markov regime switching;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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