 Are short sellers incrementally informed prior to earnings announcements?Benjamin Blau () and J. Michael Pinegar Journal of Empirical Finance, 2013, vol. 21, issue C, 142-155 Abstract: Contrary to the hypothesis that informed short sellers increase their positions prior to earnings announcements, we find that short activity declines in the pre-announcement period compared with activity in non-announcement time. This statistically significant, but economically modest, decline may suggest that the fraction of informed short sellers actually increases if (as Diamond and Verrecchia (1987) suggest) the uncertainty around earnings announcements increases short selling costs and causes uninformed short sellers to withdraw from the market. While we find a statistically and economically significant inverse relation between pre-announcement short activity and announcement period returns, when we control for the non-announcement ability of short sellers to predict future returns documented by Diether et al. (2009), the significance of the relation between pre-announcement short activity and announcement period returns vanishes. Thus, we infer that short sellers are not incrementally informed prior to earnings announcements. Keywords: Short selling; Private information; Earnings announcements (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:21:y:2013:i:c:p:142-155 DOI: 10.1016/j.jempfin.2013.01.005 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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