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 () and James Upson ()

The Journal of Real Estate Finance and Economics, 2014, vol. 49, issue 4, 454-476

Abstract: 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. Copyright Springer Science+Business Media New York 2014

Keywords: Short Selling; Fails-to-deliver; Financial Crisis; Regulation; REITs; G01; G12; G14; G18 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11146-013-9438-8

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