Dissecting Short-Sale Performance: Evidence from Large Position Disclosures
68 Pages Posted: 17 Jul 2015 Last revised: 18 Aug 2017
Date Written: August 15, 2017
Short sellers are perceived as informed, sophisticated investors. Yet little is known about their identity and the determinants of their performance. Using novel data of daily disclosures in Europe, we identify large short positions of individual institutions and study their performance. Hedge funds, the predominant short sellers, receive on average an annualized Fama-French risk-adjusted return of about 5.5%. Although this return is explained by trading on mispricing-related factors, there is considerable variation across funds. Local, diversified, and active funds outperform other funds. We also document a first-mover advantage and an outperformance related to investment horizon and industry experience.
Keywords: Short-sale performance, Anomalies, Hedge funds, Fund attributes
JEL Classification: G14, G15, G23
Suggested Citation: Suggested Citation