Title

The Good News in Short Interest

Publication Type

Journal Article

Publication Date

4-2010

Abstract

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.

Keywords

Short sales, Short interest, Short sale constraints, Market efficiency

Discipline

Business | Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial Economics

Volume

96

Issue

1

First Page

80

Last Page

97

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2009.12.002

Publisher

Elsevier

Additional URL

http://dx.doi.org/10.1016/j.jfineco.2009.12.002

Comments

Fama/DFA Prize for the best paper in the Journal of Financial Economics.