Essays on Shariah Compliant Real Estate Investments

Ph.DDOCTOR OF PHILOSOPH

How do Stocks in BRICS co-move with Real Estate Stocks?

This paper investigates BRICS markets’ integration and segmentation between real estate indices and stock indices, and the possibility of establishing “wealth” and “credit” effects. The analysis of the relationship is based on updated techniques in time series using the concepts of fractional integration and cointegration and Granger causality. This allows us to look at market efficiency and bi-directional long-run equilibrium relationships between the two variables in the five countries. The results indicate that all the series are highly persistent, with orders of integration around 1 implying the possibility of markets to be efficient. However, we do not find any evidence suggesting long run equilibrium relationships between the real estate stock indices and the stocks indices. Meanwhile, causality is bi-directional in the case of South Africa, thus both “wealth effect” and “credit effect” exist, while only “credit effect” is established in India and Russia.pre-print406 K

The effect of gold market speculation on REIT returns in South Africa : a behavioral perspective

This study provides novel insight to the evolution of herd behavior during crisis periods by relating the time-variation in investor herding to speculation in gold, an asset traditionally considered a safe haven during periods of market crisis. We find that higher level of speculation in gold significantly contributes to herding in the emerging South African real estate investment trust (REIT) market, particularly during the mid-2008 to 2011 period, matching the duration and aftermath of the global financial crisis. The evidence of herding in this market is in contrast to the static and two-regime model specifications that fail to detect herding, underscoring the significance of econometric specifications that directly track the time-variation in herd behavior. Our findings suggest that speculative activities in the gold market contain valuable information regarding market fundamentals that drive investor behavior in emerging markets and that regulators should monitor indicators of speculative activities in gold in order to implement circuit breakers in their markets that may help mitigate the negative effects of herd behavior.https://link.springer.com/journal/121972018-10-08hj2018Economic

Stock Market Responses to COVID-19: The Behaviors of Mean Reversion, Dependence and Persistence

We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques. The evidence suggests that stock markets generally follow a synchronized movement before and the stages of the pandemic shocks. We find while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices in whole sample analysis covering the period of 02.08.2019 and 09.07.2020. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management

Is there convergence between the BRICS and International REIT Markets?

The BRICS market represents high growth economies. This paper empirically examines the long-run equilibrium as well as the short-run linkages between the BRICS REIT markets and the REIT markets in developed countries (United States, Australia and the United Kingdom). We employ fractional co-integration techniques between the BRICS REIT markets and 3 most developed REIT markets. This paper tests the hypothesis of fractional integration, our results showed no evidence of co-integration between BRICS REIT markets and the REIT markets of any of the developed economies in the long run, while the result only indicated that the BRICS REIT markets is influenced by the developed economies in the short run. The implications of this study shows that a portfolio of developed REIT markets are diversifiable when added into a portfolio of BRICS REIT markets. This is particularly significant for investors and fund analysts in other to reduce portfolio risks

How do Stocks in BRICS co-move with REITs?

This paper investigates BRIC markets’ integration and segmentation between REITs and stock indices, and the possibility of establishing “wealth” and “credit” effects. The analysis of the relationship is based on updated techniques in time series using the concepts of fractional integration and cointegration and Granger causality. This allows us to look at bidirectional long-run equilibrium relationships between the two variables in the five countries. The results indicate that all the series are highly persistent, with orders of integration around 1. However, we do not find any evidence suggesting long run equilibrium relationships between the REITs and the stocks. Meanwhile, causality is bi-directional in the case of South Africa, thus both “wealth effect” and “credit effect” exist, while only “credit effect” is established in India and Russia

Is there convergence between the BRICS and International REIT Markets?

The BRICS market represents high growth economies. This paper empirically examines the long-run equilibrium as well as the short-run linkages between the BRICS REIT markets and the REIT markets in developed countries (United States, Australia and the United Kingdom). We employ fractional co-integration techniques between the BRICS REIT markets and 3 most developed REIT markets. This paper tests the hypothesis of fractional integration, our results showed no evidence of co-integration between BRICS REIT markets and the REIT markets of any of the developed economies in the long run, while the result only indicated that the BRICS REIT markets is influenced by the developed economies in the short run. The implications of this study shows that a portfolio of developed REIT markets are diversifiable when added into a portfolio of BRICS REIT markets. This is particularly significant for investors and fund analysts in other to reduce portfolio risks

Stock Market Responses to COVID-19: Mean Reversion, Dependence and Persistence Behaviours

We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques by considering the data spanning from August 2nd 2019 to July 9th 2020. The evidence suggests that stock markets generally follow a synchronized movement before and during the stages of the pandemic’s shocks. We find that, while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices- in the full sample analysis. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management

The idiosyncratic risks of a Shariah compliant REIT investor

This paper investigates the impact of Shariah compliant investment principles on the idiosyncratic risks of a Shariah compliant REIT investor. The importance of idiosyncratic risks in explaining cross-sectional returns of a constructed Shariah compliant REIT investor's portfolio is further examined in this paper. In all constructed portfolios examined, there is a positive and significant relationship between expected idiosyncratic volatility and expected REIT returns of the constructed Shariah compliant portfolio (GCC Shariah compliance standards). This result is consistent and persistent after robustness tests are carried out. As such, idiosyncratic risks are an important factor to consider in the pricing of Shariah compliant REIT stock returns. On further examination, the significant relationship as seen in the constructed Shariah compliant portfolio can be explained from the firm-specific risks of the residential REIT sector which is the most dominant sector during the period of investigation. The implications of these results also point to the importance of Shariah compliance standards and screening methods which is a significant feature associated with the understanding of the relationship of idiosyncratic risks on expected REIT returns of Shariah portfolios. Results show contrasting results between a less-restrictive and restrictive Shariah compliant portfolio. We find a significant relationship between expected returns and the idiosyncratic risks specifically in the restrictive Shariah compliant portfolio