UPSI Digital Repository (UDRep)
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Abstract : Universiti Pendidikan Sultan Idris |
The Islamic Real Estate Investment Trust (i-REIT) serves as an alternative Islamic
investment instrument to sukuk and shariah compliant stock, which observes i-REIT
experiencing a significant growth and demand in portfolio property value and Islamic
market capitalization. The attractiveness of i-REIT has made it to become one of the
common real estate investments apart from the physical property investment with a
long-term and cheaper capital for property ownership. Likewise, the continual
expansion of the i-REIT market in Malaysia is making great financial motivation that
expands the investment spectrum. Therefore, the need to study the driving financial and
macroeconomic interaction force with i-REIT stock return, which in turn further
contributes to the Islamic finance literature. This study was confined to nine study
variables and two latent which the financial and macroeconomic factors. The financial
factors comprise the long-term bond yield, systematic risk, stock market index and
rental index. Meanwhile on macroeconomic latent as control variables are measured by
the economic growth, interest rate, inflation rate, money supply and foreign exchange
rate. The empirical tests adopted in this study are Johansen and Julius co-integration (JJ
Test), Vector Error Correction Model (VECM), granger causality, impulse responses
function, variance decomposition and Exponential Generalized Autoregressive
Conditional Heteroskedasticity (EGARCH) model. The empirical analysis shows that
the macroeconomic variables, systematic risk (β: -0.0275) and rental index (β: 0.0765)
have a significant positive long-run relationship towards the i-REIT stock return.
Meanwhile, the granger causality test shows correlation of unidirectional of which
systematic risk (β: 15.5035) and foreign exchange rate (β: 13.3725) granger causes i-
REIT stock return. Additionally, the EGARCH modelling, signals a negative shock for
all the study variables except for stock market index (β: 0.0312) showing a positive
shock. It signifies that good news of stock market index will increase i-REIT stock
return volatility more than bad news of the size evidence of leverage effect. In
conclusion, this study extended multifactor arbitrage pricing theory by including the
systematic risk and rental index factors performing vital roles apart from the
macroeconomic variables. This study will be a cornerstone for potential investors in
providing a deeper understanding in comprehension linkage between the financial and
macroeconomic variables and it potentially could offer as an alternatives investment
instrument in structuring the portfolio. |
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