UK Short Selling Activity and Firm Performance

15 Pages Posted: 12 Jan 2013

See all articles by Panagiotis Andrikopoulos

Panagiotis Andrikopoulos

Centre for Financial and Corporate Integrity (CFCI), Coventry University

James Clunie

Jupiter Asset Management Ltd.

Antonios Siganos

University of Glasgow

Date Written: November/December 2012

Abstract

We use short selling data from Data Explorers from 2004 to 2012 to investigate the extent to which UK short sellers are informed investors, in accordance with Diamond and Verrecchia's (1987) hypothesis. Our results suggest that heavily‐shorted stocks fail to consistently underperform their lightly‐shorted counterparts. Short sellers’ ability to predict firm performance is limited to firms that struggle for survival, such as firms about to enter bankruptcy or financial firms during the financial crisis. These results provide new evidence regarding the source of short‐sellers’ information and should be of interest to academics, financial regulators and market participants.

Keywords: short sellers, informed trading, financial crisis, bankrupt firms

Suggested Citation

Andrikopoulos, Panagiotis and Clunie, James and Siganos, Antonios, UK Short Selling Activity and Firm Performance (November/December 2012). Journal of Business Finance & Accounting, Vol. 39, Issue 9‐10, pp. 1403-1417, 2012. Available at SSRN: https://ssrn.com/abstract=2199728 or http://dx.doi.org/10.1111/jbfa.12003

Panagiotis Andrikopoulos (Contact Author)

Centre for Financial and Corporate Integrity (CFCI), Coventry University ( email )

Priory Street
Coventry, CV1 5FB
United Kingdom
+44(0)247 765 7920 (Phone)

James Clunie

Jupiter Asset Management Ltd. ( email )

1 Grosvenor Place
London, SW1X 7JJ
United Kingdom

Antonios Siganos

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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