How are shorts informed?

Joseph Engelberg, Adam Reed and Matthew Ringgenberg

Journal of Financial Economics, 2012, vol. 105, issue 2, 260-278

Abstract: We find that a substantial portion of short sellers' trading advantage comes from their ability to analyze publicly available information. Using a database of short sales combined with a database of news releases, we show that the well-documented negative relation between short sales and future returns is twice as large on news days and four times as large on days with negative news. Further, we find that the most informed short sales are not from market makers but rather from clients, and we find only weak evidence that short sellers anticipate news events. Overall, the evidence suggests that public news provides valuable trading opportunities for short sellers who are skilled information processors.

Keywords: Asymmetric information; Manipulation; News media; Short sales (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (201)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:105:y:2012:i:2:p:260-278

DOI: 10.1016/j.jfineco.2012.03.001

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