Publication Type
Journal Article
Version
publishedVersion
Publication Date
11-2019
Abstract
This paper documents that stocks with a decreasing (increasing) trend in their short selling as proxied by the long-term change in short interest experience significant and positive (negative) abnormal returns. Moreover, the positive abnormal returns have larger absolute values and are more persistent. The return predictability of the trend in short selling is not subsumed by the level of short interest and other well-known determinants of stock returns. Investor sentiment does not affect the profitability of the trend strategy. Our results suggest that market participants underreact to public information on short interest and that short sellers are sophisticated investors.
Keywords
Short interest, Short selling, Short-Sale constraints, Underreaction
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Annals of Economics and Finance
Volume
20
Issue
2
First Page
565
Last Page
586
ISSN
1529-7373
Publisher
Peking Univ. Press
Citation
ZHU, Zhaobo; DUAN, Xinrui; and Jun TU.
The trend in short selling and the cross section of stock returns. (2019). Annals of Economics and Finance. 20, (2), 565-586.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6830
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.