Peer Stock Short Interest and Future Returns

47 Pages Posted: 13 Sep 2014 Last revised: 22 Feb 2015

See all articles by Ferhat Akbas

Ferhat Akbas

University of Illinois at Chicago

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Egemen Genc

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Date Written: February 18, 2015

Abstract

Firm-level monthly short interest is positively and significantly related to the returns of firms that compete in the same product markets. This finding is robust to standard controls and cannot be explained by industry momentum, industry lead-lag relationships, or industry information spillover effects. Short interest also contains information about the fundamentals of competing firms. Trading cost reductions are an important driver for trading a firm’s competitors rather than the firm’s own stocks. Our findings suggest that short sellers’ trades play an important role in the price discovery of competing firms, beyond their direct effects documented previously.

JEL Classification: G14

Suggested Citation

Akbas, Ferhat and Boehmer, Ekkehart and Genc, Egemen, Peer Stock Short Interest and Future Returns (February 18, 2015). Available at SSRN: https://ssrn.com/abstract=2495068 or http://dx.doi.org/10.2139/ssrn.2495068

Ferhat Akbas

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60076
United States

Ekkehart Boehmer (Contact Author)

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

Singapore

Egemen Genc

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

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