Which shorts are informed?

Author

Ekkehart BOEHMER, Singapore Management UniversityFollow
Charles M. JONES, Columbia University
Xiaoyan ZHANG, Cornell University

Publication Type

Journal Article

Version

submittedVersion

Publication Date

4-2008

Abstract

We construct a long daily panel of short sales using proprietary NYSE order data. From 2000 to 2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that shorting constraints are not widespread. As a group, these short sellers are well informed. Heavily shorted stocks underperform lightly shorted stocks by a risk-adjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional nonprogram short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results indicate that, on average, short sellers are important contributors to efficient stock prices.

Keywords

short selling, return predictability, informed trading

Discipline

Business | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Finance

Volume

63

Issue

2

First Page

491

Last Page

528

ISSN

1540-6261

Identifier

10.1111/j.1540-6261.2008.01324.x

Publisher

Wiley

Citation

BOEHMER, Ekkehart; JONES, Charles M.; and ZHANG, Xiaoyan. Which shorts are informed?. (2008). Journal of Finance. 63, (2), 491-528.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4660

Copyright Owner and License

Authors

Creative Commons License

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

Comments

Finalist, 2008 Smith Breeden Prize. BSI Gamma Foundation Grant.

Additional URL

https://doi.org/10.1111/j.1540-6261.2008.01324.x