The purpose of this paper is to determine if artificial neural network (ANN) works better than linear regression in predicting Hong Kong real estate investment trusts’ (REITs) excess return.

Both ANN and the regression were applied in this study to forecast the Hong Kong REITs’ (HK-REITs) return using the capital asset pricing model and Fama and French’s three-factor models. Each result was further split into annual time series as a measure to investigate the consistency of the performance across time.

ANN had produced a better forecasting results than the regression based on their trading performance. However, the forecasting performance varied across individual REITs and time periods.

ANN should be considered for use when one were to attempt forecasting the HK-REITs excess returns. However, the trading performance should be always compared with buy and hold strategy prior to make any investment decisions.