An Empirical Study of Derivatives use in the REIT Industry
研究了REIT行业衍生品使用情况，发现41%的REIT使用利率衍生品，规模较大和抵押型REIT更可能使用，但使用量上小型和高负债REIT更多，结果支持对冲的进入成本和财务困境成本解释。
We examine the use of derivatives in the real estate investment trust (REIT) industry. Tax considerations and speculative motives should not be important factors here, as REITs pay no corporate income tax and their speculative activities are limited by regulations. We find that 41 % of REITs use interest‐rate derivatives, although the amount of derivatives on average is not high. Our principal results are that larger REITs and mortgage REITs are more likely to use derivatives. However, in terms of the amount of derivatives, REITs that are smaller and have a larger amount of debt tend to use more derivatives. We interpret the results as evidence supportive of substantial entry costs for hedging and financial‐distress costs being a major consideration for the level of hedging. REITs with greater ratio of market to book value of assets also tend to use more derivatives. However, this result is not robust across different sample sets. We therefore view this as weak evidence supporting the agency‐cost explanation for hedging. Additional analysis on interest‐rate risk and hedging activities finds that mortgage REITs tend to increase their hedging activities when interest rates decrease, while the opposite is true for equity REITs. We interpret this as evidence consistent with prepayment risk being a major factor for mortgage REITs, while equity REITs primarily hedge to control funding costs.