Dissecting Short-Sale Performance: Evidence from Large Position Disclosures
67 Pages Posted: 17 Jul 2015 Last revised: 30 Jul 2021
Date Written: August 15, 2017
Using novel data of daily disclosures in Europe, we identify large short positions of individual institutions and study their performance. Hedge funds earn as a group an average, annualized Fama-French risk-adjusted return of about 5.5%, which is largely explained by trading on mispricing-related factors. However, there is rich variation in performance across investors and positions. Exploiting information on the identity of the short sellers, we find that local, more diversified, and more active hedge funds outperform their counterparts. We also document a first-mover advantage and an increasing performance with longer investment horizon and greater industry experience.
Keywords: Short-sale performance, Anomalies, Hedge funds, Fund attributes
JEL Classification: G14, G15, G23
Suggested Citation: Suggested Citation