Short Sellers' Trading on Anomalies
Cornell University - Dyson School of Applied Economics and Management; Korea University - Department of Finance
Florida State University
November 11, 2014
We document and discuss cues that drive arbitrage activity. We focus on 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 speculate and take on too much risk, our evidence suggests that short arbitrageurs are non-speculative and prefer strategies with low risk, high returns and low correlations with other strategies. Correspondingly, we present evidence that short arbitrageurs act in an informed- and in a market-stabilizing manner.
Number of Pages in PDF File: 45
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: November 13, 2014
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