Short Sellers' Trading on Anomalies
Cornell University - Dyson School of Applied Economics and Management; Korea University - Department of Finance
Florida State University
December 17, 2014
We study arbitrageurs specializing in the shorting of seemingly overpriced securities. Contrary to popular accounts that the convexity in fee structure utilized in the hedge fund industry encourages managers to take on risk, our evidence suggests that short arbitrageurs shy away from risk and prefer low-risk, high-return strategies that have weak correlations with other strategies. Correspondingly, we present evidence that short arbitrageurs act in an informed and market-stabilizing manner.
Number of Pages in PDF File: 46
Keywords: Arbitrageurs, Short Sellers, Incentive Effects of Contracts, Market Efficiency
JEL Classification: G11, G12, G14, M41working papers series
Date posted: August 30, 2012 ; Last revised: December 18, 2014
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