Shorting Demand and Predictability of Returns

Journal of Investment Management; 2009 1st Quarter, Vol. 7 Issue 1, p36-52

Posted: 28 May 2016

See all articles by Lauren Cohen

Lauren Cohen

Harvard Business School; National Bureau of Economic Research (NBER)

Christopher J. Malloy

Harvard Business School; National Bureau of Economic Research (NBER)

Date Written: 2009

Abstract

The article presents a study on the association between shorting activity and future stock returns in the equities market, with the use of proprietary stock loan fees and quantities dataset. Results showed that the separation of supply and demand shifts offer a better view of the information incorporated in the securities lending market, and shorting demand increases predict negative abnormal returns the following month. The study suggests that understanding the dynamics of the securities lending market is important in making better forecasts of future stock returns.

Keywords: Stocks, Marketing, Returns on Sales, Loans, Demand (Economic Theory), Economic Forecasting, Loan Servicing -- Costs, Securities, Supply & Demand

Suggested Citation

Cohen, Lauren and Malloy, Christopher J., Shorting Demand and Predictability of Returns (2009). Journal of Investment Management; 2009 1st Quarter, Vol. 7 Issue 1, p36-52. Available at SSRN: https://ssrn.com/abstract=1607041

Lauren Cohen (Contact Author)

Harvard Business School ( email )

Rock Center 321
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Boston, MA 02163
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HOME PAGE: http://www.people.hbs.edu/lcohen

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Christopher J. Malloy

Harvard Business School ( email )

Soldiers Field Road
Baker Library 277
Boston, MA 02163
United States
617-495-4383 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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