What do short sellers know?

What do short sellers know?

Using NYSE short-sale order data, we investigate whether short sellers' informational advantage is related to firm earnings and analyst-related events. With a novel decomposition method, we find that while these fundamental event days constitute only 12% of sample days, they account for over 24...

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Bibliographic Details
Main Authors: BOEHMER, Ekkehart, JONES, Charles M., WU, Juan (Julie), ZHANG, Xiaoyan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2020
Subjects:
short selling
firm fundamentals news
private information
return decomposition
analysts
Finance and Financial Management
Portfolio and Security Analysis
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/6698
https://ink.library.smu.edu.sg/context/lkcsb_research/article/7697/viewcontent/ShortSellers_2020_sv.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Using NYSE short-sale order data, we investigate whether short sellers' informational advantage is related to firm earnings and analyst-related events. With a novel decomposition method, we find that while these fundamental event days constitute only 12% of sample days, they account for over 24% of the overall underperformance of heavily shorted stocks. Importantly, short sellers use both public news and private information to anticipate news regarding earnings and analysts. Shorting's predictive ability remains significant after controlling for information in analyst actions and displays no reversal patterns, indicating that short sellers know more than analysts, and the nature of their information is long term.

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