Title

The Information Content of REIT Short Interest: Investment Focus and Heterogeneous Beliefs

Authors

Authors

H. H. Chen; D. H. Downs;G. A. Patterson

Comments

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Abbreviated Journal Title

Real Estate Econ.

Keywords

STOCK RETURNS; SHORT SALES; OWNERSHIP; MARKET; EXPLANATIONS; RISK; Business, Finance; Economics; Urban Studies

Abstract

This article examines real estate investment trusts (REITs) to determine the correspondence between short interest and subsequent prices. The theoretical basis for our tests comes from the overvaluation conditions created by a combination of costly short selling and heterogeneous beliefs. This article exploits the unique characteristics of REITS as they are similar with respect to high dividend payouts and differentiated by underlying real asset investments. An innovative aspect of the methodology involves partitioning firms based on investment focus as a proxy for transparency and as a determinant of heterogeneous beliefs regarding valuation. The findings (i) affirm the information content of REIT short interest and (ii) highlight the importance of investment focus in resolving the divergence in investor opinions of value. Overvaluation conditions exist among REITs with greater short interest and less transparency, whereas such valuation conditions do not appear among transparent REITs, regardless of the level of short selling.

Journal Title

Real Estate Economics

Volume

40

Issue/Number

2

Publication Date

1-1-2012

Document Type

Article

Language

English

First Page

249

Last Page

283

WOS Identifier

WOS:000304313400003

ISSN

1080-8620

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