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Short Selling and Inside Information

Fernando Chague () and Rodrigo De-Losso, Alan De Genaro, Bruno C. Giovannetti
Authors registered in the RePEc Author Service: Rodrigo De-Losso and Bruno Cara Giovannetti ()

No 2013_06, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Using data on all lending deals in the Brazilian stock market from 2009 to 2011, we provide answers to: i) are short-sellers informed in Brazil?, ii) which short sellers are informed?, and iii) how are short sellers informed? The answer to the first question is positive, the Brazilian short-seller is informed. Among short-sellers, individual investors are the most informed ones followed by investment funds. As to how they short-sell, we show that funds tend to short-sell on the days and the day after news releases, an indication that funds short-sell after processing news. On the other hand, individual investors increase short-selling activity in advance of bad news and decrease short-selling activity prior to good news. We take this as a strong indication of inside information trading in the short selling market.

Keywords: Asymmetric information; Manipulation; News media; Short sales (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 G28 (search for similar items in EconPapers)
Date: 2013-05-13, Revised 2016-07-28
New Economics Papers: this item is included in nep-mst
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