Short Interest and the Stock Market Relation with News Sentiment from Traditional and Social Media Sources

Smales, Lee A.; Liu, Zhangxin (Frank); Chamberlain, Ben

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Short Interest and the Stock Market Relation with News Sentiment from Traditional and Social Media Sources

Australian Economic Papers, Volume 62, Issue 2, Pages 321-334

15 Pages Posted: 5 Oct 2022 Last revised: 10 Aug 2023

See all articles by Lee A. Smales

Zhangxin (Frank) Liu

The University of Western Australia - Department of Accounting and Finance

We examine how the stock market relation to news sentiment – from traditional and social media (Twitter) sources - interacts with stock short selling. Our sample includes the S&P500 constituents for the period January 2016 to December 2020. We find evidence that returns are positively related to both news types, and the relationship is stronger for firms that are small and/or highly shorted. This is consistent with short sellers targeting firms that are most responsive to (negative) news releases and so more likely to compensate for the additional costs encountered in shorting stocks.

Keywords: Short Interest, Sentiment, News Analytics, Twitter, stock markets

Suggested Citation: Suggested Citation

Smales, Lee A. and Liu, Zhangxin (Frank) and Chamberlain, Ben, Short Interest and the Stock Market Relation with News Sentiment from Traditional and Social Media Sources. Australian Economic Papers, Volume 62, Issue 2, Pages 321-334, Available at SSRN: https://ssrn.com/abstract=4238962