Investing in gold or REIT index in Turkey: evidence from global financial crisis, 2018 Turkish currency crisis and COVID-19 crisis

Abstract

Purpose Under the current Coronavirus Disease 2019 (COVID-19) pandemic circumstances where the gold prices are increasing and the stocks are in free fall, this research aims to compare the returns of gold prices and Turkish real estate investment trust (T-REIT) index by covering the 2008 global financial crisis, 2018 Turkish currency crisis and 2020 COVID-19 pandemic-based economic crisis periods and examine the effects of the returns of gold and the T-REIT index on each other, a research area that has been limited in the literature. Design/methodology/approach For the empirical analysis, vector auto regression model was used, and Augmented Dickey–Fuller and Granger causality tests were also conducted. The average returns were compared with the coefficient of variation analysis. Findings The results of the study exhibited that except for the 2008 global financial crisis period, 2018 Turkish currency crisis and 2020 COVID-19 pandemic-based economic crisis, the T-REIT index performs better than gold prices, but it is a riskier instrument, and both investment instruments do not affect the returns of each other. The segmentation of both instruments recommends the fund managers including both tools for diversification of a portfolio. Research limitations/implications In Turkey, gold prices are valued based on the fluctuations of the global gold prices, as well as the Turkish Lira/US Dollar currency exchange rates. The effect of the exchange rates may be considered in future studies, and the study may be conducted based on the USD values of the T-REIT index and global gold prices. Further studies may also include the comparison between the T-REIT index returns and a set of commodities such as the Goldman Sachs Commodity Index. This study covered only the first five months of 2020 to analyze the COVID-19 pandemic-based economic crisis initial effects, and a successor study is also recommended by including more new data of the post-COVID-19 pandemic and comparing both results. Practical implications The results of the research are expected to contribute to the REIT literature and give insight to investors about their investment choices while including both investment tools in their portfolio, especially for the future conditions of the new COVID-19 pandemic-based economic crisis. Social implications The study may provide insight for individuals, especially those who are considering possible investment options in the Turkish real estate market in the post-COVID-19 pandemic crisis. Originality/value Gold and real estate have always been considered as important investment instruments. Gold is commonly accepted as a safe haven in the literature, and the REITs are considered as long-term investment instruments by many scholars. While gold prices increase in the windy periods, the returns of real estate investments have more cyclical movements based on mostly the macroeconomic conditions and its integration with stock markets, yet the real estate is a common long-term investment tool, especially because of the regular income it generates for the retirement years. By covering three crisis periods including the COVID-19 pandemic-based economic crisis effects, making research about two important investment tools would contribute to the literature, especially in which the studies in this area were very limited.

Volatility Spillover between Stock Returns and Oil Prices during the Covid-19 Pandemic in ASEAN

“…Before the 2007 monetary crisis, there used to be a lot of volatility between India, Pakistan, and Hong Kong, and there was once also a lot of volatility between the inventory markets of Sri Langka and Pakistan after the tragedy (John Wei et al, 1995). There was a unidirectional volatility spillover effect between inventory expenditure and shopping for and boosting levels before the economic crisis, and a bidirectional volatility spillover effect following the 2008 global economic disaster in Turkey (Sumer and Ozorhon, 2020).…”

“…One of the most important criteria for survival is the role of the economic gadget in overcoming financial devastation at some time throughout the epidemic (Arfah et al, 2020). Although it was once discovered at some point during the epidemic that some stock indices in the housing zone had extended (Sumer and Ozorhon, 2020). This ensures that a variety of funding options will be available throughout the pandemic.…”

Applying the Fama and French three-factor model to analyze risk/reward in the Spanish REITs: an ARDL approach

“…A series of similar studies have also analysed the significance and performance of REITs in a mixed-asset portfolio (Newell et al, 2010;Pham, 2011aPham, , 2011bNewell and Peng, 2012;Peng and Newell, 2012;Newell et al, 2013Newell et al, , 2015Marzuki, 2016, 2018;Sumer and Ozorhon, 2020). Regarding the S-REIT market, related research is extremely limited.…”

Determinant of Residential Property Price Index in Five Asian Emerging Market Countries: A Demand and Supply Approach

“…The exchange rate is a noteworthy factor to evaluate the current condition and future projections of the property industry, specifically in developing countries (Sumer & Ozorhon, 2021). Consequently, the relationship between property prices and exchange rates has always been a crucial issue, notably due to the concerns regarding the impacts of imported goods.…”

“…The argument is generated by the increasing availability of bank credit, which can lead to the escalation in the housing loan demand in line with lower interest rates. As a result, the housing demand will grow, which also increases house prices.The exchange rate is a noteworthy factor to evaluate the current condition and future projections of the property industry, specifically in developing countries(Sumer & Ozorhon, 2021). Consequently, the relationship between property prices and exchange rates has always been a crucial issue, notably due to the concerns regarding the impacts of imported goods.…”