Short interest, returns, and fundamentals
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.
Short interest, fundamental information, cross-section of stock returns
Corporate Finance | Finance and Financial Management
Wiley: 12 months
AKBAS, Ferhat; BOEHMER, Ekkehart; ERTURK, Bilal; and SORESCU, Sorin.
Short interest, returns, and unfavorable fundamental information. (2017). Financial Management. 46, (2), 455-486. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5272
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