Journal of Financial and Quantitative Analysis Vol. 58 No. 1 2023
Mining the Short Side: Institutional Investors and Stock Market Anomalies
Abstract
This article investigates the short-side anomaly trading behavior of alternative mutual funds (AMFs) based on their short positions in U.S. domestic equities. In aggregate, AMFs demonstrate the ability to exploit well-documented stock market anomalies on the short side, and the overpriced stocks sold short by AMFs generate significant negative alpha. Further, AMFs’ short-side trades exhibit significant return predictability, which can at least partially derive from their ability to process public information on firm and anomaly characteristics. Finally, AMFs’ short-side anomaly-based trading activity and profitability appear to be more pronounced among the stocks with higher credit risk or dynamic short-selling risk.
- DOI
- 10.1017/s0022109022000527
- Volume
- 58
- Issue
- 1
- Pages
- 392-418
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref