Short sales and class-action lawsuits

Benjamin Blau () and Philip L. Tew

Journal of Financial Markets, 2014, vol. 20, issue C, 79-100

Abstract: Gande and Lewis (2009) show class-action lawsuit filings are anticipated by investors. In this paper, we examine short-selling activity surrounding lawsuit filings and find that short activity surges in the days before the filing. However, short-selling activity remains significantly high until a few days after the filing. We also find some evidence that both pre- and post-filing short activity can be used to predict the outcome of the filing. In particular, we find that, after controlling for a variety of firm-specific factors, short activity during the filing period increases the likelihood that the lawsuit eventually generates money for the plaintiff.

Keywords: Short sales; Class-action lawsuits; Informed trading; Private information (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:20:y:2014:i:c:p:79-100

DOI: 10.1016/j.finmar.2014.04.002

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