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.
short selling, return predictability, informed trading
Business | Finance and Financial Management | Portfolio and Security Analysis
Journal of Finance
BOEHMER, Ekkehart; JONES, Charles M.; and ZHANG, Xiaoyan.
Which shorts are informed?. (2008). Journal of Finance. 63, (2), 491-528. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4660
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