Do Short Sellers Front-Run Insider Sales?
University of Minnesota - Twin Cities - Carlson School of Management
University of Toronto - Rotman School of Management
January 28, 2011
MIT Sloan Research Paper No. 4706-08
We study the behavior of short sellers as informed market participants and examine potential sources of their information. Using a newly available dataset with high-frequency short sales data, we find evidence of significant increases in short sales immediately prior to large insider sales, but not prior to small insider sales. We examine a number of explanations that the increase in short sales is driven by public information, either about the firm or about the impending insider sale. The evidence is inconsistent with these explanations, but is consistent with front-running facilitated by leaked information.
Number of Pages in PDF File: 47
Keywords: Short Selling, Insider Sales, Front Running, Information Leakage
JEL Classification: G10, G14, G18, G30, M41working papers series
Date posted: June 5, 2008 ; Last revised: March 3, 2013
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