Trading on Fluffy News: The Effect of Information Tangibility on Short Sellers’ Behavior

42 Pages Posted: 18 Mar 2012 Last revised: 27 May 2013

See all articles by Bastian von Beschwitz

Bastian von Beschwitz

Board of Governors of the Federal Reserve System

Oleg Chuprinin

UNSW; Financial Research Network (FIRN)

Massimo Massa

INSEAD - Finance

Date Written: May 27, 2013


We investigate how short sellers strategically exploit the liquidity generated by the arrival of ambiguous information – i.e. information likely to cause disagreement in interpretation. Using a sample of newspaper articles, media newswires, and press releases, we construct a measure of information tangibility as the ratio of numbers to the total words in an article. First, we show that noise trading increases in the presence of “fluffy” news – i.e. news which has little numerical content. Measures of stock liquidity increase and the news-day return mean-reverts more on days with intangible news releases. Second, we find that short sellers exploit this increase in noise trading to place their informed trades. Moreover, intangibility has a bigger effect on short sellers’ trading after an exogenous decrease in liquidity following a deletion of the stock from the S&P 500 index. At the same time, it has a lower effect when investor attention is more distracted otherwise – e.g. during significant sporting events. We rule out the alternative explanation of short sellers’ superior ability to interpret qualitative news by showing that their trades on days with such news do not predict future stock returns better. Overall, our results indicate that short sellers exploit additional liquidity around media events to place their informed trades.

Keywords: Short selling, Information, Liquidity

JEL Classification: G10, G12, G14

Suggested Citation

von Beschwitz, Bastian and Chuprinin, Oleg and Massa, Massimo, Trading on Fluffy News: The Effect of Information Tangibility on Short Sellers’ Behavior (May 27, 2013). Available at SSRN: or

Bastian Von Beschwitz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Oleg Chuprinin

UNSW ( email )

Room 349, UNSW Business School
High St
UNSW Sydney, NSW 2052
406674419 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics