Short Interest, Institutional Ownership, and Stock Returns

45 Pages Posted: 6 Apr 2004

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: December 20, 2004

Abstract

Stocks are short sale constrained when there is a strong demand to sell short and a limited supply of shares to borrow. Using data on both short interest, a proxy for demand, and institutional ownership, a proxy for supply, we find that constrained stocks underperform during 1988-2002 by a significant 215 basis points per month on an EW basis, although by only an insignificant 39 basis points per month on a VW basis. For the overwhelming majority of stocks, short interest and institutional ownership levels make short selling constraints unlikely.

Keywords: Short Sales, Limits to Arbitrage, Short Selling

JEL Classification: G12, G14

Suggested Citation

Asquith, Paul and Pathak, Parag A. and Ritter, Jay R., Short Interest, Institutional Ownership, and Stock Returns (December 20, 2004). Available at SSRN: https://ssrn.com/abstract=525623 or http://dx.doi.org/10.2139/ssrn.525623

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Jay R. Ritter (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

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