Risk Analysis of REITs Investments

• Main Authors: Shu-Ling Chang, 張淑玲
• Other Authors: Cheng-Ming Liu
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/p48ymm

碩士 === 銘傳大學 === 風險管理與保險學系碩士在職專班 === 94 === In the last recent years, “Real Estate Investments (REITs) have gained significant popularity among Asian market as REITs enables individual investors to participate in real estate investments via securitization. With only a small amount of funds required, REITs serve as great financial instruments for small-scale investors to secure stable returns while protect asset value from inflation erosion. Taiwan government has also learned from the successful financial innovations in U.S and Japan and enacted “real estate securitization statute”, which was passed and enforced in July, 2003 by Legislative Yuan. The purpose of the study is to explore the risk of REITs from the perspective of investors. In summary, investment risks of REITs include: interest rate risk (from issuers), value variation in trusted assets, variation in return on underlying securities, liquidity risk, changes in financial/economic condition, damage not fully covered by insurance, and credit risk. Furthermore, risks of REITs investment may vary due to a changing investment landscape. Risk analysis therefore becomes a critical issue to REITs investments. The study not only elaborates the types and source of risk in REITs investments, but also addresses benefits of REITs for investors given relevant risk disclosure. While REITs promise a higher rate or return than other fixed income instruments, the study points out a positive association between return and risk, which investors should be aware of. Finally, the study indicates the rising demand for REITs in Taiwan and proposed recommendations with respect to the problems occurred in Taiwan REIT market .