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The short-selling skill of institutions and individuals: a market-wide and out-of-sample analysis

Fernando Chague (), Rodrigo de Losso da Silveira Bueno and Bruno Giovannetti ()
Authors registered in the RePEc Author Service: Rodrigo De-Losso

No 469, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: Using market-wide data from the Brazilian stock lending market, we find strong evidence of short-selling skill for some institutions and individuals. Skilled short-sellers present out-of-sample performance persistence, both over time and across stocks. Performance persistence is robust: by randomly splitting the sample across stocks, we show that performance in a group of stocks often predicts performance in another group of stocks. We then study how skilled short-sellers trade. We find that most of their profit does not come from firm-specific private information, they follow short-term momentum strategies, and they do not display the disposition effect.

Date: 2018-02
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