Best Short

92 Pages Posted: 15 Aug 2019 Last revised: 26 Sep 2022

See all articles by Pasquale Della Corte

Pasquale Della Corte

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Robert Kosowski

Imperial College Business School; CEPR (Centre for Economic Policy Research); University of Oxford, Oxford-Man Institute of Quantitative Finance

Nikolaos Rapanos

Imperial College Business School

Multiple version iconThere are 2 versions of this paper

Date Written: September 25, 2021

Abstract

We infer investors' expectations about future asset returns through a measure of conviction
that exploits granular net short positions disclosed at the investor-stock level
for European markets. A strategy that sells high-conviction stocks and buys lowconviction
stocks, named Best Short, generates a positive excess return unrelated to
well-known short-selling anomalies, traditional risk exposure, frictions in the securities
lending market, and firm characteristics. Also, funds acting firrst pick high-conviction
stocks and outperform other funds. Our results suggest that short conviction harvests
information from better informed investors and can be motivated by a model of
information acquisition and portfolio concentration.

Keywords: Disclosure, Regulation, Short-sale Performance, Anomalies, Hedge Funds

JEL Classification: G14, G15, G23

Suggested Citation

Della Corte, Pasquale and Kosowski, Robert and Rapanos, Nikolaos, Best Short (September 25, 2021). Available at SSRN: https://ssrn.com/abstract=3436433 or http://dx.doi.org/10.2139/ssrn.3436433

Pasquale Della Corte

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London, SW7 2AZ
United Kingdom
+44(0)20 759 49331 (Phone)

HOME PAGE: http://sites.google.com/view/pasqualedellacorte

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Robert Kosowski

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
+442075943294 (Phone)

HOME PAGE: http://www3.imperial.ac.uk/people/r.kosowski

CEPR (Centre for Economic Policy Research) ( email )

London
United Kingdom

HOME PAGE: http://www.cepr.org/

University of Oxford, Oxford-Man Institute of Quantitative Finance ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

Nikolaos Rapanos (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

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