Diversification Benefits of Real Estate Investment Trusts in Dubai

22 Pages Posted: 16 Aug 2009

See all articles by Danny Di Nardo

Danny Di Nardo

BNP Paribas

John A. Anderson

City University London - Sir John Cass Business School

Date Written: August 11, 2009

Abstract

This paper examines whether unleveraged REITs in Dubai help optimize the risk/return characteristics of a mixed asset portfolio. The performance is also analyzed using Shariah compliant REIT structures incorporating discussion of the performance of REITs operating in a zero-tax environment within the Modigliani and Miller (1958) framework. The empirical results confirms that investment in real estate via Dubai REITs would have substantially improved the performance of a mixed asset portfolio through its ability to hedge inflation, enhance returns and reduce volatility. These characteristics persisted under sensitivity testing. Furthermore, the conclusions find that leveraging the REIT produced increased risk without providing risk/return benefits.

Keywords: REIT, Emerging Markets, Dubai, Portfolio Diversification, Capital Structure

JEL Classification: G15, L85

Suggested Citation

Di Nardo, Danny and Anderson, John A., Diversification Benefits of Real Estate Investment Trusts in Dubai (August 11, 2009). 22nd Australasian Finance and Banking Conference 2009, Available at SSRN: https://ssrn.com/abstract=1447246 or http://dx.doi.org/10.2139/ssrn.1447246

Danny Di Nardo (Contact Author)

BNP Paribas ( email )

Paris
France

John A. Anderson

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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