Information Leakage from Short Sellers

Fernando Chague, Bruno Giovannetti and Bernard Herskovic

No 31927, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using granular data on the entire Brazilian securities lending market merged with all trades in the centralized stock exchange, we identify information leakage from short sellers. Our identification strategy explores trading execution mismatches between short sellers’ selling activity in the centralized exchange and borrowing activity in the over-the-counter securities lending market. We document that brokers learn about informed directional bets by intermediating securities lending agreements and leak that information to their clients. We find evidence that the information leakage is intentional and that brokers, clients and short sellers benefit from it. We also study leakage effects on stock prices.

JEL-codes: G12 G14 G23 G24 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-fmk and nep-mst
Note: AP CF
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Citations: View citations in EconPapers (1)

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