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Show us your shorts!

Bige Kahraman and Salil Pachare

No 12658, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How does greater public disclosure of arbitrage activity and informed trading affect informational efficiency? To answer this, we exploit rule amendments in U.S. securities markets, which increased the frequency of public disclosure of short positions. Higher public disclosure can potentially improve or deteriorate informational efficiency. We find that with more frequent disclosure, short-sellers' information is incorporated into prices faster, improving informational efficiency. In support of the mechanism driving this result, we document significant market reactions to short interest announcements, suggesting investor learning, and furthermore, we find increases in short-selling activity and reductions in short-sellers' holding periods with the rule amendments.

Keywords: InformationalEfficiency; PublicDisclosure; ShortInterest (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mst
Date: 2018-01
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