Dividend-yield variation as an asset selection criterion in momentum strategies of Brazilian real estate investment trusts

Abstract

We aimed at showing the usage of the dividend-yield (DY) variation as a criterion for selecting Brazilian real estate investment trusts (BR-REITs) in momentum strategies. The identification of momentum in BR-REITs with this selection criterion is, to the best of our knowledge, new and gives rise to different strategies that seize abnormal returns. This study allows a new understanding of the dynamics between prices and dividend payments, which compose BR-REITs returns. It is of major importance, considering the relevance of the DY ratio for the asset class. The studied strategies delivered results above the industry s index with expressive magnitude, are of simple elaboration, and can be applied by any individual or institutional investor. Portfolios performances were measured by Sharpe ratio (SR), alpha of the Fama and French three-factor model, and excess returns obtained in relation to the BR-REITs index. Statistical tests were applied to verify the significance of the results. This study showed that strategies around the momentum effect that buy (sell) BR-REITs with greater (smaller) DY variations in previous months tended to have superior performance to the industry s index.