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Do Short Sale Transactions Precede Bad News Events?Holger DaskeUniversity of Mannheim Scott A. RichardsonLondon Business School A. Irem TunaLondon Business School May 2005 Abstract: Do short sale transactions precede bad news events? Not recently. This paper examines short sale transactions around significant news events. Using a novel and comprehensive dataset covering daily short sale transactions for 4,193 securities on the New York Stock Exchange for the period April 1, 2004 through March 31, 2005, we find no evidence that short sale transactions are concentrated prior to bad news events. This challenges prior research that has found short sale transactions have tended to precede stock price declines. Additional analysis reveals that there is no reliable evidence of daily changes in short sales transactions leading daily stock returns, inconsistent with the notion that short sale transactions (at least in the aggregate) are based on private information.
Number of Pages in PDF File: 45 Keywords: short selling, sophisticated investors, management forecasts, earnings announcements JEL Classification: G10, G12, M41, M43 working papers seriesDate posted: May 13, 2005Suggested CitationContact Information
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