58 Pages Posted: 9 Jan 2017 Last revised: 14 Sep 2017
Date Written: September 13, 2017
Using market-wide data from the Brazilian stock lending market, we find strong evidence of short-selling skill among some institutions and individuals. Skilled short-sellers present out-of-sample performance persistence, both over time and across stocks. Performance persistence is robust: by randomly splitting the sample across stocks, we show that performance in a group of stocks often predicts performance in another group of stocks. We then study how skilled short-sellers trade. We find that most of their profit does not come from firm-specific private information, they follow short-term momentum strategies, and they do not display the disposition effect.
Keywords: short-selling, skilled investors, out-of-sample performance, short-term momentum, disposition effect
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, The Short-Selling Skill of Institutions and Individuals: a Market-wide and Out-of-sample Analysis (September 13, 2017). Available at SSRN: https://ssrn.com/abstract=2894507