Publication Type
Journal Article
Version
publishedVersion
Publication Date
12-2016
Abstract
The existing literature treats the short side (i.e., short selling) and the long side of hedge fund trading (i.e., fund holdings) independently. The two sides, however, complement each other: opposite changes in the two are likely to be driven by information, whereas simultaneous increases (decreases) of the two may be motivated by hedging (unwinding) considerations. We use this intuition to identify informed demand and document that it exhibits highly significant predictive power over returns (approximately 10% per year). We also find that informed demand forecasts future firm fundamentals, suggesting that hedge funds play an important role in information discovery. (C) 2016 Elsevier B.V. All rights reserved.
Keywords
Short selling, Hedge funds, 13F, Informed demand, Hedging
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
122
Issue
3
First Page
544
Last Page
567
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2016.09.001
Publisher
Elsevier
Citation
JIAO, Yawen; MASSA, Massimo; and ZHANG, Hong.
Short selling meets hedge fund 13F: An anatomy of informed demand. (2016). Journal of Financial Economics. 122, (3), 544-567.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7053
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.