Uncovering Skilled Short-Sellers

Posted: 9 Jan 2017 Last revised: 12 May 2017

Fernando Chague

University of Sao Paulo (USP) - Department of Economics

Rodrigo De-Losso

University of Sao Paulo (USP) - Department of Economics

Bruno Giovannetti

University of Sao Paulo (USP) - Department of Economics

Date Written: February 9, 2017

Abstract

Studies on how skilled short-sellers trade typically employ aggregate shorting volume. Unfortunately, aggregate shorting volume is polluted by shorting for hedging, long-short strategies, and liquidity supplying. Using a unique data set that tracks all short-sellers in Brazil at the deal-level, we are able to uncover the skilled short-sellers and study them in isolation. This is revealing. Skilled short-sellers are actually short-term momentum investors (as opposed to contrarian as suggested by aggregate shorting volume), a significant part of their skill comes from market-timing, they are proficient at choosing when to cover their positions and, unlike unskilled short-sellers, display no disposition effect.

Keywords: short-selling, skill, stock-picking, market-timing, disposition effect

JEL Classification: G12, G14

Suggested Citation

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Uncovering Skilled Short-Sellers (February 9, 2017). Available at SSRN: https://ssrn.com/abstract=2894507

Fernando Chague

University of Sao Paulo (USP) - Department of Economics ( email )

Brazil

Rodrigo De-Losso

University of Sao Paulo (USP) - Department of Economics ( email )

Av. Prof. Luciano Gualberto 908
Sao Paulo SP, 05508-900
Brazil
551130916070 (Phone)

Bruno Giovannetti (Contact Author)

University of Sao Paulo (USP) - Department of Economics ( email )

Rua Luciano Gualberto
Sao Paulo, 10027
Brazil

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