Do Short Sellers Front-Run Insider Sales?

47 Pages Posted: 5 Jun 2008 Last revised: 13 Jan 2016

See all articles by Mozaffar Khan

Mozaffar Khan

Causeway Capital Management, LLC

Hai Lu

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 28, 2011

Abstract

We study the behavior of short sellers as informed market participants and examine potential sources of their information. Using a newly available dataset with high-frequency short sales data, we find evidence of significant increases in short sales immediately prior to large insider sales, but not prior to small insider sales. We examine a number of explanations that the increase in short sales is driven by public information, either about the firm or about the impending insider sale. The evidence is inconsistent with these explanations, but is consistent with front-running facilitated by leaked information.

Keywords: Short Selling, Insider Sales, Front Running, Information Leakage

JEL Classification: G10, G14, G18, G30, M41

Suggested Citation

Khan, Mozaffar and Lu, Hai, Do Short Sellers Front-Run Insider Sales? (January 28, 2011). MIT Sloan Research Paper No. 4706-08. Available at SSRN: https://ssrn.com/abstract=1140694 or http://dx.doi.org/10.2139/ssrn.1140694

Mozaffar Khan (Contact Author)

Causeway Capital Management, LLC

Hai Lu

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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