Title

Which Shorts are Informed?

Publication Type

Journal Article

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.

Discipline

Business | Finance and Financial Management

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

Additional URL

http://dx.doi.org/10.1111/j.1540-6261.2008.01324.x

Comments

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