Short interest, returns, and fundamentals

Ferhat Akbas, Ekkehart Boehmer, Bilal Erturk, Sorin Sorescu: This study show that short interest predicts stock returns because short sellers are able to anticipate bad news, negative earnings surprises, and downward revisions in analyst earnings forecasts.

Author(s):

Ferhat Akbas

School of Business, University of Kansas

Ekkehart Boehmer

EDHEC Business School

Bilal Erturk

Spears School of Business, Oklahoma State University

Sorin Sorescu

Mays Business School, Texas A&M University

They appear to have information about these events several months before they become public. Most importantly, the cross-sectional relation between short interest and future stock returns vanishes when controlling for short sellers’ information about future fundamental news. Thus, short sellers contribute, in a significant manner, to price discovery about firm fundamentals, but the source of their information remains an open question.
Pdf
Short interest, returns, and fundamentals...
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Type: Working paper
Date: le 04/02/2013
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

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