The Good News in Short Interest
Stocks with relatively high short interest subsequently experience negative abnormal returns, but the effect can be transient and of debatable economic significance. In contrast, relatively heavily traded stocks with low short interest experience both statistically and economically significant positive abnormal returns. These positive returns are often larger (in absolute value) than the negative returns observed for heavily shorted stocks. Thus, the positive information associated with low short interest, which is publicly available, is only slowly incorporated into prices, which raises a broader market efficiency issue. Our results also cast doubt on existing theories of the impact of short sale constraints.
Short sales, Short interest, Short sale constraints, Market efficiency
Business | Finance | Finance and Financial Management
Journal of Financial Economics
BOEHMER, Ekkehart; Huszar, Zsuzsa R.; and Jordan, Bradford D..
The Good News in Short Interest. (2010). Journal of Financial Economics. 96, (1), 80-97. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4664