Abstract

http://ssrn.com/abstract=2440922
 
 

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Have Short Sellers Become More Sophisticated? Evidence from Market Anomalies


Juan (Julie) Wu


University of Georgia

Andrew (Jianzhong) Zhang


University of Nevada, Las Vegas - Department of Finance

May 22, 2014


Abstract:     
We examine how short sellers form trading strategies when faced with progressively more crowded signals over time. While they increasingly use anomaly-based signals to short overpriced firms (short arbitrage), they even more intensively use these signals to avoid underpriced firms (short avoidance). Short sellers earn all their abnormal returns from short arbitrage the entire time period but avoid potential losses by pursuing non-anomaly strategies in recent years. The negative short interest-return relation can be fully explained by anomalies only in early years, suggesting short sellers have become more sophisticated in using less-crowded non-anomaly signals to improve performance in recent years.

Number of Pages in PDF File: 56

Keywords: financial market anomalies, short arbitrage, trading strategies

JEL Classification: G12, G14

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Date posted: May 24, 2014  

Suggested Citation

Wu, Juan (Julie) and Zhang, Andrew (Jianzhong), Have Short Sellers Become More Sophisticated? Evidence from Market Anomalies (May 22, 2014). Available at SSRN: http://ssrn.com/abstract=2440922 or http://dx.doi.org/10.2139/ssrn.2440922

Contact Information

Juan (Julie) Wu (Contact Author)
University of Georgia ( email )
Dept. of Finance, Terry College of Business
University of Georgia
Athens, GA 30602-6254
United States
HOME PAGE: http://www.terry.uga.edu/directory/profile/juliewu/
Andrew (Jianzhong) Zhang
University of Nevada, Las Vegas - Department of Finance ( email )
4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States
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