Faculty Publications


The information content of REIT short interest: Investment focus and heterogeneous beliefs.

SelectedWorks Author Profiles:

Gary A. Patterson

Document Type


Publication Date


Date Issued

January 2012

Date Available

August 2014




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.


Citation only. Full-text article is available through licensed access provided by the publisher. Published in Real Estate Economics, 40, 249-283. doi: 10.1111/j.1540-6229.2011.00312.x.




Wiley-Blackwell Publishing, Inc.

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Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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