When Short Sellers and Corporate Insiders Agree on Stock Pricing

Posted: 21 Jun 2018 Last revised: 21 Feb 2019

See all articles by Chune Young Chung

Chune Young Chung

Chung-Ang University - College of Business & Economics

Hong Kee Sul

Chung-Ang University - College of Business & Economics

Kainan Wang

University of Toledo

Date Written: June 1, 2018

Abstract

The authors propose a strategy that utilizes trading information of both short sellers and corporate insiders. They find that the strategy earns statistically significant and economically meaningful risk-adjusted returns for at least one year, which stems mainly from the information asymmetry between informed and uninformed investors. Based on this finding, they then show that the strategy works best in high information asymmetry environments and during economic expansion periods. The results provide important implications for investment practitioners. Investors interested in high information asymmetry firms can refer to the information on short interest and insider demand when making investment decisions.

Keywords: short interest; insider trading; strategy; information asymmetry

Suggested Citation

Chung, Chune Young and Sul, Hong Kee and Wang, Kainan, When Short Sellers and Corporate Insiders Agree on Stock Pricing (June 1, 2018). Journalof Portfolio Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3191949

Chune Young Chung

Chung-Ang University - College of Business & Economics ( email )

84 Heuk-suk Ro
Seoul
Korea, Republic of (South Korea)

Hong Kee Sul

Chung-Ang University - College of Business & Economics ( email )

84 Heuk-suk Ro
Seoul
Korea, Republic of (South Korea)

Kainan Wang (Contact Author)

University of Toledo ( email )

Department of Finance
Mail Stop 103
Toledo, OH 43606
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
824
PlumX Metrics