Can Shorts Predict Returns? A Global Perspective

80 Pages Posted: 3 Oct 2015 Last revised: 8 Mar 2021

See all articles by Ekkehart Boehmer

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Zsuzsa R. Huszar

Central European University; National University of Singapore ; Singapore Management University

Yanchu Wang

School of Finance - Shanghai University of Finance and Economics

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Xinran Zhang

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: March 8, 2021

Abstract

Using multiple short sale measures, we examine the predictive power of short sales for future stock returns in 38 countries from July 2006 to December 2014. We find that the days-to-cover ratio and the utilization ratio measures have the most robust predictive power for future stock returns in the global capital market. Our results display significant cross-country and cross-firm differences in the predictive power of alternative short sale measures. The predictive power of shorts is stronger in countries with non-prohibitive short sale regulations and for stocks with relatively low liquidity, high shorting fees, and low price efficiency.

Keywords: Stock Price Efficiency, Liquidity, Market Development, Short Sale Regulations, Short Selling

JEL Classification: G14, G12

Suggested Citation

Boehmer, Ekkehart and Huszar, Zsuzsa R. and Huszar, Zsuzsa R. and Wang, Yanchu and Zhang, Xiaoyan and Zhang, Xinran, Can Shorts Predict Returns? A Global Perspective (March 8, 2021). Available at SSRN: https://ssrn.com/abstract=2668357 or http://dx.doi.org/10.2139/ssrn.2668357

Ekkehart Boehmer

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

Singapore

Zsuzsa R. Huszar

National University of Singapore ( email )

Business School
15 Kent Ridge Drive
Singapore, 117592
Singapore
+65 6516 8017 (Phone)
+65 6779 2083 (Fax)

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Yanchu Wang

School of Finance - Shanghai University of Finance and Economics ( email )

Shanghai, 200433
China

Xiaoyan Zhang (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Xinran Zhang

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

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