Alternative Title
Short interest, returns, and fundamentals
Publication Type
Journal Article
Version
submittedVersion
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
Citation
AKBAS, Ferhat; BOEHMER, Ekkehart; ERTURK, Bilal; and SORESCU, Sorin.
Short interest, returns, and unfavorable fundamental information. (2017). Financial Management. 46, (2), 455-486.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5272
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org./10.1111/fima.12144