| Real Estate Investment Trusts (REITs) is a very important means of real estate securitizations. The real estate securitization is a process that real estate investments of less liquidity and non-securities form were transformed directly into the financial transactions of securities on the capital market. As a fund, REITs has obviously advantages in risks diversification and managerial specification. This paper introduces the concepts, types, revenue structures, risks, and operational modes of REITs, and current development of China’s real estate trust products. At present, there is no formal REITs on the capital market in China yet. For domestic financial sector, REITs is still new matter so that researches about it are mainly grouped in scientific research institutions, securities companies, and trust companies.Investment risks are the ones which any investment tool has to face, and even as the saying goes, revenues via investment tools come from those risks they have assumed. Therefore, how to control and diversify investment risks are one of the core issues in investment strategies. The paper briefly introduces Modern Portfolio Theory, Capital Asset Pricing Model and Arbitrage Pricing Theory, which laid the cornerstones of modern theories on the field of risks diversification. REITs Portfolio Optimization Model in Decision-making within β Index, which is derived from those theories above, concentrates on analyzing systematic risks and unsystematic risks. This paper via setting a series of data from China Real Estate Index System (CREIS) into REITs Portfolio Optimization Model in Decision-making within β Index, tries to positively analyze the effects of diversification through region-diversified strategies and type-diversified strategies in investment decision-making process. The results calculated by the model and data above, confirm those propositions that qualitative analyses have mentioned in this paper. Then, this paper points out the practical significances of the following four areas on developing domestic REITs:(a) it could decentralize operational risks of domestic commercial banks;(b) it could ease the funding requirement of domestic real estate enterprises;(c) it could remedy defects of domestic trusts on real estate;(d) it could improve the business approaches of domestic real estate enterprises.In the discussions on development of REITs, some scholars put forward the idea of creative that the government could combine REITs’introduction with the construction of affordable housing in order to establish a sounder system of affordable housing. This paper tries to discuss briefly else about the new operational mode within the combinations of REITs and low-rent housing, which is an important part of affordable housing.Though the analyses and discussions in the full text, the paper draw the following conclusions finally:(a) to develop REITs in China could broaden the financing channels of domestic real estate enterprises;(b) region-diversified strategies and type-diversified strategies could decentralize unsystematic risks in REITs portfolio;(c) systems of low-rent housing could attempt to introduce REITs involved in their operations. |
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