COMPARATIVE PERFORMANCE OF
Date
2011-06-02
Authors
Nsibande, Charles Muzi
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Abstract
The purpose of the research was to determine whether there was any significant
difference in the performances of property unit trusts (PUTs) and property loan stocks
(PLSs). Since the studies by Fleming (2002) and Kollenberg (2002), a change has
been introduced to the legislation governing PUTs, which allows PUTs to leverage up
to 30% of their property values. During the last two years, there have been debates
about changing the structure of both PUTs and PLSs to resemble the structure of
Real Estate Investment Trusts in the United States of America. The study also
introduced the application of value at risk (VaR) to compare the return versus risk
profile of PUTs against the return versus risk profile of PLSs.
The study population was based on all the PUTs and PLSs listed on the JSE
Securies Exchange for a period of 15 years. The Sharpe measure was used to
determine the performance of the shares over the period 1990 to 2004, first looking
at 1-year returns, then 3-year returns, 5-year returns, 7-year returns, 10-year returns
and lastly 15-year returns. Both nominal and risk-adjusted returns were subjected to
the NCSS statistical program analysis to determine whether there were significant
differences.
Earlier literature reviewed indicated that the nominal returns would be different but
the research findings indicate that there is no significant difference in both nominal
and risk-adjusted returns of PUTs compared to the returns of PLSs. However, simple
arithmetic analysis, using averages, indicates a difference in the nominal returns, but
not in risk-adjusted returns, as expected from the literature review. The VaR analysis
clearly indicates that PUTs have better risk-sharing characteristics than PLSs.
Description
MBA - WBS
Keywords
Property unit trusts, Property loan stocks