The Journal of Real Estate Finance and Economics

, Volume 49, Issue 4, pp 454–476 | Cite as

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

  • Erik Devos
  • Thomas McInish
  • Michael McKenzie
  • James Upson


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 



We thank Tim McCormick, Piet Eichholtz (editor), Steven Jones, Jim Schneringer, Ting Foo Sing, an anonymous referee, and seminar participants at 2010 FMA, 2012 NUS-MIT-Maastricht Real Estate Symposium, and the University of Texas at El Paso for helpful comments. Jagadish Dandu provided help in data collection. We thank Ken French for data on industry returns. We retain responsibility for any remaining errors.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Erik Devos
    • 1
  • Thomas McInish
    • 2
  • Michael McKenzie
    • 3
  • James Upson
    • 1
  1. 1.College of Business AdministrationUniversity of Texas—El PasoEl PasoUSA
  2. 2.Fogelman College of Business and EconomicsUniversity of MemphisMemphisUSA
  3. 3.Faculty of Economics and BusinessUniversity of SydneySydneyAustralia

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