THE IMPACT OF THE GEORGIAN REAL ESTATE INVESTMENT TRUST ON THE PERFORMANCE OF VARIOUS PORTFOLIOS

Abstract

This study aims to explore the potential impact of the anticipated Georgian Real Estate Investment Trusts (REITs) on the performance of investment portfolios. Due to the absence of Georgian REITs, a simulated financial asset representing a Georgian Residential REIT was engineered. The study employed correlation analysis, portfolio analysis, Sharpe Ratio evaluation, and Efficient Frontier analysis. Portfolios in the study included various assets such as Georgian Commercial Banks USD Certificates of Deposits, Georgian Treasury Bonds, NASDAQ Index, and the Georgian Pension Fund Global Equity Portfolio. Monthly data from 2021-2023 were used to engineer Georgian REIT and estimate expected returns, volatility, Sharpe ratios, and correlation coefficients. The study concludes that incorporating a Georgian REIT into diversified investment portfolios can significantly enhance their attractiveness by improving the risk return trade-off. The findings highlight the necessity for Georgian regulators and market participants to consider the introduction of REITs as a viable investment vehicle. Additionally, the research contributes to the limited scholarly literature on REITs' impact in emerging markets, offering a framework for future studies in similar contexts.

Keywords

• emerging financial markets
• financial engineering
• simulated reit
• sharpe ratio maximisation
• efficient frontier analysis