Using a five-year panel of proprietary NYSE short sale order data, we investigate the sources of short sellers’ informational advantage.
EDHEC Business School
Columbia Business School
Krannert School of Management, Purdue University
Heavier shorting is found the week before negative earnings surprises, analyst downgrades, and downward revisions in analyst earnings forecasts. The biggest effects are associated with analyst downgrades. While earnings and analyst event days constitute only 12.0% of sample days, they account for over 24% of the overall underperformance of heavily shorted stocks. The results are robust to factor timing and indicate that short sellers are well-informed about upcoming earnings. Their information about fundamentals closely resembles that possessed by analysts.
|Research Cluster :||Finance|