Abstract

http://ssrn.com/abstract=1535337
 
 

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How are Shorts Informed? Short Sellers, News, and Information Processing


Joseph Engelberg


University of California, San Diego (UCSD) - Rady School of Management

Adam V. Reed


University of North Carolina Kenan-Flagler Business School

Matthew Ringgenberg


Washington University in Saint Louis - Olin Business School

August 1, 2012

Journal of Financial Economics, Forthcoming

Abstract:     
We find that a substantial portion of short sellers’ trading advantage comes from their ability to analyze publicly available information. Using a database of short sales combined with a database of news releases, we show that the well-documented negative relation between short sales and future returns is twice as large on news days and four times as large on days with negative news. Further, we find that the most informed short sales are not from market makers but rather from clients, and we find only weak evidence that short sellers anticipate news events. Overall, the evidence suggests that public news provides valuable trading opportunities for short sellers who are skilled information processors.

Number of Pages in PDF File: 53

Keywords: asymmetric information, manipulation, news media, short sales

JEL Classification: G12, G14

working papers series


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Date posted: January 13, 2010 ; Last revised: October 9, 2012

Suggested Citation

Engelberg, Joseph and Reed, Adam V. and Ringgenberg, Matthew, How are Shorts Informed? Short Sellers, News, and Information Processing (August 1, 2012). Journal of Financial Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1535337 or http://dx.doi.org/10.2139/ssrn.1535337

Contact Information

Joseph Engelberg
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
Adam V. Reed
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Matthew C. Ringgenberg (Contact Author)
Washington University in Saint Louis - Olin Business School ( email )
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130-4899
United States
HOME PAGE: http://apps.olin.wustl.edu/faculty/Ringgenberg/
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