The Journal of Real Estate Finance and Economics

, Volume 49, Issue 4, pp 454-476

First online:

Naked Short Selling and the Market Impact of Fails-to-Deliver: Evidence from the Trading of Real Estate Investment Trusts

  • Erik DevosAffiliated withCollege of Business Administration, University of Texas—El Paso Email author 
  • , Thomas McInishAffiliated withFogelman College of Business and Economics, University of Memphis
  • , Michael McKenzieAffiliated withFaculty of Economics and Business, University of Sydney
  • , James UpsonAffiliated withCollege of Business Administration, University of Texas—El Paso

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Naked short selling and purposeful fails-to-deliver have been identified in the popular press and by the SEC as contributing factors to the stock market decline in 2008. We investigate the market impact of the announcement that fails-to-deliver have occurred for a sample of real estate investment trusts (REITs). We find little evidence that this announcement affects returns or has any market manipulation ability. We find that fails-to-deliver are most consistent with a 1 to 3 days delivery difference between the short sale and offsetting covering trades. These results hold independent of the type of REIT (equity or mortgage REITs). Overall, our findings suggest that naked short selling and purposeful fails-to-deliver may not have contributed much to REIT losses during the financial crisis.


Short Selling Fails-to-deliver Financial Crisis Regulation REITs

JEL codes

G01 G12 G14 G18