Equity term structure of property funds and REITs in Thailand

Abstract

The equity term structure of property funds and REITs in Thailand is upward-sloping. This result contradicts with various studies suggesting that the term structure of risk premia is decreasing. A tenet of those studies is that, by holding long-term equity, investors are willing to forego a part of the compensation to avoid immediate risks which seems to be reverse for property funds and REITs in Thailand. There is evidence that the correlation between size and return is positive. Unlike U.S. REIT, the momentum factor has no application to explain the difference in excess returns. High turnover property funds and REITs perform better in asset duration factor. The explainability of systematic risk factors also improves when adding the interaction term to specify the above-average turnover ratio group. This concrete result suggests that funds and trusts which have long asset duration earn higher excess return than the shorter asset duration giving a hint of investment strategy for investing property funds and REITs in Thailand.