Which Shorts Are Informed?
Coauthor(s): Ekkehart Boehmer, Xiaoyan Zhang.
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We construct a long daily panel of short sales using proprietary NYSE order data. During 2000-2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that short-sale constraints are not widespread. As a group, these short sellers are quite well-informed. Heavily shorted stocks underperform lightly shorted stocks by a riskadjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional non-program short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results
indicate that, on average, short sellers are important contributors to efficient stock prices.
Source: Journal of Finance
Boehmer, Ekkehart, Charles Jones, and Xiaoyan Zhang. "Which Shorts Are Informed?" Journal of Finance 63, no. 2 (2008): 491-527.