Short Seller Skills in the Global Context: Public News Processing and Access to Private Information
60 Pages Posted: 20 Sep 2022 Last revised: 28 Apr 2023
Date Written: September 7, 2022
This paper examines global sources of short sellers’ information advantages in 37 countries. I show that trading on the news brings little additional profits to short sellers outside the United States. These results are not uniform across countries: shorting on the news is highly profitable in regions with a better quality of public information environment. I find evidence that short sellers anticipate future negative news returns and trade in the same direction as insiders, suggesting they possess valuable private information. Overall, my results indicate that short sellers’ information advantages in the global capital market come primarily from their access to private information rather than from their public news processing skills.
Keywords: short selling, informed traders, news media, international stock market
JEL Classification: G12, G14, G15
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