The dividend debate between agency cost theory and information signaling theory provides contrasting explanations of the relationship between dividend payout and cash flow volatility. This paper attempts to test these two theories empirically using data from 135 public US equity REITs from 1985 to 2003. We explore the role of expected cash flow volatility as a determinant of dividend policy for REITs, by employing panel regressions on excess dividend. The paper finds strong evidence suggesting that REITs pay out substantial excess dividend to avoid agency cost when the cash flow is more volatile. The information signaling theory plays a relatively minor role in REIT firms' dividend policy concerning the cash flow volatility. Time Series Relationships between Bonds, Real Estate and Share Returns for the