What Do Short Sellers Know?

Review of Finance, Forthcoming

48 Pages Posted: 23 Dec 2012 Last revised: 24 Sep 2019

See all articles by Ekkehart Boehmer

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Charles M. Jones

Columbia Business School

J. (Julie) Wu

University of Nebraska - Lincoln

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Date Written: September 1, 2019

Abstract

Using NYSE short-sale order data, we investigate whether short-sellers’ informational advantage is related to firm earnings and analyst-related events. With a novel decomposition method, we find that while these fundamental event days constitute only 12% of sample days, they account for over 24% of the overall underperformance of heavily shorted stocks. Importantly, short-sellers use both public news and private information to anticipate news regarding earnings and analysts. Shorting’s predictive ability remains significant after controlling for information in analyst actions, and displays no reversal patterns, indicating that short-sellers know more than analysts, and the nature of their information is long term.

Keywords: short selling, firm fundamentals news, private information, return decomposition, analysts

JEL Classification: G11, G14, G23

Suggested Citation

Boehmer, Ekkehart and Jones, Charles M. and Wu, J. (Julie) and Zhang, Xiaoyan, What Do Short Sellers Know? (September 1, 2019). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2192958 or http://dx.doi.org/10.2139/ssrn.2192958

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

Charles M. Jones

Columbia Business School ( email )

3022 Broadway
Uris Hall Rm 101
New York, NY 10027
United States
(212) 854-4109 (Phone)

HOME PAGE: http://https://www8.gsb.columbia.edu/cbs-directory/detail/cj88

J. (Julie) Wu

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588
United States

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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