Best Short

83 Pages Posted: 14 Jul 2021

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)

Nikolaos Rapanos

Imperial College Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2021

Abstract

We infer investors' expectations about future stock returns through a measure of short conviction that exploits net short positions disclosed at the investor-stock level for European stock markets. A strategy that sells high-conviction stocks and buys low-conviction stocks, named Best Short, generates a risk-adjusted excess return that is larger than 8% per annum and differs from the performance of traditional strategies based on aggregate short interest. Its profitability, moreover, cannot be explained by transaction costs, stock characteristics, frictions in the securities lending market, leverage constraints, and measures of price inefficiency.

JEL Classification: G14, G15, G23

Suggested Citation

Della Corte, Pasquale and Kosowski, Robert and Rapanos, Nikolaos, Best Short (July 1, 2021). CEPR Discussion Paper No. DP16319, Available at SSRN: https://ssrn.com/abstract=3886805

Pasquale Della Corte (Contact Author)

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/

Nikolaos Rapanos

Imperial College Business School ( email )

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

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