Short Interest and Stock Returns

47 Pages Posted: 3 May 2004 Last revised: 7 Jul 2010

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: April 2004

Abstract

Using a longer time period and both NYSE-Amex and Nasdaq stocks, this paper examines short interest and stock returns in more detail than any previous study and finds that many documented patterns are not robust. While equally weighted high short interest portfolios generally underperform, value weighted portfolios do not. In addition, there is a negative correlation between market returns and short interest over our whole period. Finally, inferences from short time periods, such as 1988-1994 when the underperformance of high short interest stocks was exceptional or 1995-2002, when high short interest Nasdaq stocks did not underperform, are misleading.

Suggested Citation

Asquith, Paul and Ritter, Jay R. and Pathak, Parag A., Short Interest and Stock Returns (April 2004). NBER Working Paper No. w10434. Available at SSRN: https://ssrn.com/abstract=532993

Paul Asquith (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://bear.cba.ufl.edu/ritter

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

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