Short Interest, Institutional Ownership, and Stock Returns
Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT) - Department of Economics
Jay R. Ritter
University of Florida - Department of Finance, Insurance and Real Estate
December 20, 2004
Stocks are short sale constrained when there is a strong demand to sell short and a limited supply of shares to borrow. Using data on both short interest, a proxy for demand, and institutional ownership, a proxy for supply, we find that constrained stocks underperform during 1988-2002 by a significant 215 basis points per month on an EW basis, although by only an insignificant 39 basis points per month on a VW basis. For the overwhelming majority of stocks, short interest and institutional ownership levels make short selling constraints unlikely.
Number of Pages in PDF File: 45
Keywords: Short Sales, Limits to Arbitrage, Short Selling
JEL Classification: G12, G14working papers series
Date posted: April 6, 2004
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