**1. Introduction**

Turkish Real Estate Investment Trusts (T-REITs) have been legally established in 1995 long before many other developed countries [1] and started to be traded in Stock Exchange in 1997. Like in other markets, T-REITs are important investment vehicles, thus they are encouraged to grow by some favourable regulations [2].

Whether REITs perform better than the other financial assets has been one of the main research questions to be answered in the literature since they have started to be traded in the market. There are quite a number of studies on developed markets' REITs trying to answer this question. However, the studies on the investment performance of emerging markets' REITs are limited. Similarly, the number of studies on the performance of T-REITs can be counted on the fingers of two hands. One of the earliest studies on T-REITs is carried out by Kıyılar and

© 2016 The Author(s). Licensee InTech. This chapter is distributed under the terms of the Creative Commons

Hepşen [3]. This study compares the performance of the REIT sector with the ISE-100 index using the Sharpe and Jensen indices using monthly data for 2000–2008. Results of the study show that most of the T-REITs have higher monthly returns than those of ISE-100, but they also have higher variabilities. Thus, for most of them, Sharpe indices are lower than those of ISE-100. Although Jensen's indices are positive for most of the cases, it is not possible to claim that T-REITs perform better than common stocks since the indices are not statistically significant. Erol and Tırtıroğlu [4] compare hedging characteristics of T-REITs against inflation with stock indexes between December 1999 and December 2004. They show that REITs provide better hedge against both unexpected and expected inflation compared to stock indices and that property of T-REITs is more effective in high-inflation periods.

Erol and İleri [5] try to determine which macroeconomic factors influence BIST sector indices and individual REIT companies by analysing data between 2002 and 2011. The results show that Turkish REIT stocks act more like the stock market than the real estate sector. T-REITs, like the same BIST sectoral indices, provide negative protection against inflation, exhibit a positive correlation with real sector volatility and are heavily influenced by the ISE risk premium. The study by Aktan and Ozturk [6] investigates the risk-return relationship for T-REITs over the period 2002–2008 by using CAPM and Single Index Model (SIM) and shows that linearity assumption of these models are rejected. Altınsoy et al. [1] analyse whether the declining beta property of REITs observed in many markets also prevail for Turkey and the results show that it is true for 2002–2009. Their results show that T-REITs' betas – correlation between REITs and stock market – decreases over time. On the other hand, REIT returns more closely track stock market in highgrowth economic states than low-growth economic states, unlike to the findings from other countries. Another study [2] examines the portfolio diversification and risk/return characteristics of T-REITs using monthly data between 2008 and 2015. The study shows that Fama-French model is better than CAPM in capturing the variation of T-REITs' returns. Additional macroeconomic factors also improve the explanatory power of the model.

All of these studies cover only short-term periods. Thus, the questions of how well the T-REITs have performed over a long period and how stable the performance of T-REITs remain unanswered. Previous research shows that different sampling periods may result in different performance results [7]. Thus, it is important to adapt a longer period and try to analyse whether there are significant differences in the investment performance of T-REITs.

The objective of this study is to investigate the performance of T-REITs with respect to stock market by using risk-adjusted measures. By using a relatively longer period over 2002–2017, the study is going to investigate the stability of performance of T-REITs. In this study, we analyse four periods: 2001–2005; 2006–2008; 2009–2013 and 2014–2017. This separation allows us to distinguish both pre- and post-crisis periods and also the effects of some important regulation changes in Turkey. For example, in 2007, the new regulations regarding mortgage loans were introduced. This change was expected to increase the demand for real estate and thus to have a positive effect on the future of REITs. At the beginning, T-REITs were supposed to invest at a minimum 75% of their portfolios in real estate and real-estate backed securities with the 1998 Communique, Article 27. Later, that ratio has been decreased to 50% in 2013, so the flexibility of T-REITs with respect to investment has increased. Also, with the amendment made in 2013, requirement to have a leader entrepreneur (partner or partners having a minimum of 25% of the company's capital) has been abolished, real estate investment companies started to be able to issue real estate certificates as an extra means of finance instrument and some procedural obligations have been reduced, all of these resulting in easing of management of T-REITs. So, if not in the third period due to the financial crisis, REIT performance may be expected to be increased in the fourth period. In addition, the frequency of the data that is used in this study may give us some additional information about the time-varying behaviour of T-REITs. The study by Altınsoy et al. [1] used both daily and weekly data in analysing the time-varying behaviour of T-REITs' betas and different frequency data led them to find different empirical results, namely, they observe declining beta for the weekly data but more stable beta for daily data. The data used in this study is monthly data. Thus, it is interesting to know how using monthly data is going to contribute to this observation in the study by Altınsoy et al. [1]. The period before 2008 has also been divided into two periods based on the results of [1]. This study has also shown that tracking behaviour of REIT returns of stock market change from high-growth economic states to low-growth economic states. Thus, following this study, in defining the periods, the author also paid attention to lowgrowth and high-growth states. Accordingly, 2001–2005 and 2009–2013 periods are accepted to be high-growth periods; on the other hand, 2006–2009 and 2014–2017 periods are taken to be low-growth periods<sup>1</sup> . The study ends up analysing four different periods with the aim of observing the changes in the performance of T-REITs of these important structural changes.

Section 2 describes the data and explains the methodology employed. In Section 3, preliminary results of performance comparison between T-REITs and some financial variables are given and also its findings are reported and discussed. Final section gives the summary of results and some concluding remarks.
