Property Funds and REITs in Thailand: A CAPM Investigation

Abstract

This study examines the expected returns compared with the actual returns on Thai property funds by using the Capital Assets Pricing Model (CAPM) during period January 2012 to January 2017. The data used from property funds listed on the Stock Exchange of Thailand (SET). Using of historical monthly closed prices from each property fund for four consecutive years to find beta and apply in CAPM to get the expected returns, and using the current year closed prices data to find the average actual returns. This study also used Thai government bond rate to determine the risk-free rate. The Property Fund for Public Offering (PFPO) market and Real Estates Investment Trusts (REITs) are similar and still young, and therefore has limited availability of historical data. The result found the positive relationship between the beta and the expected returns. The lower beta or even negative beta gives negative expected returns, higher expected returns when having a higher beta. Even though with a minimal of property fund history data, found the CAPM methodology is suitable for calculated the expected returns with Thai PFPO/REITs. If the CAPM holds true with the Thai market, then the benefit will be that with the confidence of common legal structures and processes, investors will be able to make decisions based on the accurate and timely information.