Review of Finance Vol. 24 No. 6 2020

What Do Short Sellers Know?

Ekkehart Boehmer¹; Charles M. Jones²; Juan Wu³; Xiaoyan Zhang⁴

¹ Singapore Management University · ² Columbia Business School · ³ University of Nebraska–Lincoln · ⁴ PBC School of Finance of Tsinghua University

Abstract

Using NYSE short-sale order data, we investigate whether short sellers’ informational advantage is related to firm earnings and analyst-related events. With a novel decomposition method, we find that while these fundamental event days constitute only 12% of sample days, they account for over 24% of the overall underperformance of heavily shorted stocks. Importantly, short sellers use both public news and private information to anticipate news regarding earnings and analysts. Shorting’s predictive ability remains significant after controlling for information in analyst actions and displays no reversal patterns, indicating that short sellers know more than analysts, and the nature of their information is long term.

DOI

10.1093/rof/rfaa008

Volume

24

Issue

6

Pages

1203-1235

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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