Active Short Selling By Hedge Funds
59 Pages Posted: 12 Sep 2018 Last revised: 22 Jun 2019
Date Written: May 31, 2019
Short selling campaigns by hedge funds have become increasingly common in the last decade. Using a hand-collected sample of 252 campaigns, we document abnormal returns for targets of approximately -7% around the announcement date. Firm stakeholders, including the media, plaintiffs’ attorneys, and other short sellers, play an important role in campaigns. Changes in aggregate short interest do not drive the effects on firm value and stakeholder behavior. Campaigns are primarily undertaken by activist hedge funds. Evidence suggests disclosure costs and information are important channels through which activism technology affects short selling.
Keywords: Activist Hedge Funds, Short Selling
JEL Classification: G23, G14
Suggested Citation: Suggested Citation