Can shorts predict returns? A global perspective

Can shorts predict returns? A global perspective

Using multiple short-sale measures, we examine the predictive power of short sales for future stock returns in 38 countries from July 2006 to December 2014. We find that the days-to-cover ratio and the utilization ratio measures have the most robust predictive power for future stock returns in the g...

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Bibliographic Details
Main Authors: BOEHMER, Ekkehart, HUSZAR, Zsuzsa R., WANG, Yanchu, ZHANG, Xiaoyan, ZHANG, Xinran
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2022
Subjects:
stock price efficiency
liquidity
market development
short sale regulation
short selling
Finance and Financial Management
Portfolio and Security Analysis
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7006
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8005/viewcontent/ShortsPredictReturns_2021_sv.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Using multiple short-sale measures, we examine the predictive power of short sales for future stock returns in 38 countries from July 2006 to December 2014. We find that the days-to-cover ratio and the utilization ratio measures have the most robust predictive power for future stock returns in the global capital market. Our results display significant cross-country and cross-firm differences in the predictive power of alternative short-sale measures. The predictive power of shorts is stronger in countries with nonprohibitive short sale regulations and for stocks with relatively low liquidity, high shorting fees, and low price efficiency.

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