Shorting flows, public disclosure, and market efficiency

Xue Wang, Yan, Xuemin (Sterling) and Lingling Zheng

Journal of Financial Economics, 2020, vol. 135, issue 1, 191-212

Abstract: Shorting flows remain a significant predictor of negative future stock returns during 2010–2015, when daily short-sale volume data are published in real time. This predictability decays slowly and lasts for a year. Long-term shorting flows are more informative than short-term shorting flows. Indeed, abnormal short-term shorting flows do not predict future returns or anticipate bad news. We find that short sellers exploit prominent anomalies. A comparison with the Regulation SHO data indicates that the predictability is much shorter-term during 2005–2007. Short sellers appear to have shifted from trading on short-term private information to trading on long-term public information that is gradually incorporated into prices.

Keywords: Short sale; Public disclosure; Return predictability; Anomalies (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:135:y:2020:i:1:p:191-212

DOI: 10.1016/j.jfineco.2019.05.018

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