Abstract

This study examines the applicability of the Fama-French 3-factor model to Real Estate Investment Trusts (REITs) in emerging economies using monthly data from January 2016 to December 2023 for 23 REITs across five emerging markets. A Generalized Method of Moments (GMM) (system) approach assesses the impact of 12 explanatory variables, including traditional factors like market, value, size, and momentum premiums, as well as emerging market-specific factors such as the Morgan Stanley Capital International (MSCI) Emerging Markets Currency Index and Bloomberg Commodity ExAgriculture Index. Control variables like political stability, foreign direct investment, and portfolio investment are also included. The results show that value premium, foreign direct investment, portfolio investment, and
commodity prices positively influence REIT excess returns, while momentum premium and political instability negatively affect them. These findings highlight the combined importance of traditional and emerging marketspecific factors, emphasizing the critical role of stable political conditions for REIT performance. This research contributes valuable insights for investors and policymakers in understanding REIT dynamics in emerging markets.