Alternative Title

Short interest, returns, and fundamentals

Publication Type

Journal Article

Publication Date

6-2017

Abstract

Several months before information becomes public, the level of short interest contains value-relevant information about publicly traded corporations. Short interest predicts future bad news, negative earnings surprises, and downward revisions in analyst earnings forecasts. This informational content is stronger for stocks that are harder to short. We also find that nearly half of the well-known cross-sectional relation between short interest and future stock returns is related to future changes in firms’ value-relevant information. Our results suggest that short interest predicts future returns, in part, due to short sellers’ ability to uncover unfavorable information about firms.

Keywords

Short interest, fundamental information, cross-section of stock returns

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Financial Management

Volume

46

Issue

2

First Page

455

Last Page

486

ISSN

0046-3892

Identifier

10.1111/fima.12144

Publisher

Wiley: 12 months

Creative Commons License

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

Additional URL

http://doi.org./10.1111/fima.12144

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