What do Short Sellers Know?

Using a five-year panel of proprietary NYSE short sale order data, we investigate the sources of short sellers’ informational advantage.

Author(s):

Ekkehart Boehmer

EDHEC Business School

Charles M. Jones

Columbia Business School

Xiaoyan Zhang

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.

Type: Working paper
Date: le 23/01/2012
Research Cluster : Finance

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