Do Short Sellers Front-Run Insider Sales?

47 Pages Posted: 5 Jun 2008 Last revised: 3 Mar 2013

See all articles by Mozaffar Khan

Mozaffar Khan

University of Minnesota - Twin Cities - Carlson School of Management; 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 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)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Causeway Capital Management, LLC

Hai Lu

University of Toronto - Rotman School of Management ( email )

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,464
Abstract Views
13,822
Rank
18,320
PlumX Metrics