How are Short-Sales Different from 'Regular' Trades?

50 Pages Posted: 19 Mar 2010

See all articles by Florian Bardong

Florian Bardong


Söhnke M. Bartram

University of Warwick; Centre for Economic Policy Research (CEPR)

Pradeep K. Yadav

University of Oklahoma Price College of Business

Date Written: March 15, 2010


We examine the differences between short sales and "regular" trades with regard to the nature of their information content. First, we find that short-sales impound private information that is significantly longer-lived than that in regular trades, and accordingly find that short-sales play an important stabilizing role by providing short-term intraday liquidity during periods of buying pressure. Second, we find that the information advantage of short-sellers originates from skilled analysis of publicly available data rather than corporate "insider" type information. In this context, while short-sellers are strong in relation to individual firm-specific information, they react to public information rather than exploit insider knowledge, and their informational advantage over regular trades increases with estimation horizon for both market-wide and security-specific information. And, they are not using "insider" firm-specific information around negative earnings announcements but analyzing public information on the day of the announcement to derive their "private" information advantage, and furthermore, are also aggressively supplying liquidity around positive earnings announcements.

Suggested Citation

Bardong, Florian and Bartram, Söhnke M. and Yadav, Pradeep K., How are Short-Sales Different from 'Regular' Trades? (March 15, 2010). WBS Finance Group Research Paper No. 140, Available at SSRN: or

Florian Bardong

BlackRock ( email )

United Kingdom

Söhnke M. Bartram

University of Warwick ( email )

Warwick Business School
Finance Group
Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Pradeep K. Yadav (Contact Author)

University of Oklahoma Price College of Business ( email )

307 W.Brooks, Room 3270 Division of Finance
Norman, OK 73019
United States
4053255591 (Phone)
4053255491 (Fax)


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