Which Shorts are Informed?

48 Pages Posted: 15 Mar 2006

See all articles by Ekkehart Boehmer

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Charles M. Jones

Columbia Business School

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Date Written: February 4, 2007

Abstract

We construct a long daily panel of short sales using proprietary NYSE order data. During 2000-2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that short-sale constraints are not widespread. As a group, these short sellers are quite well-informed. Heavily shorted stocks underperform lightly shorted stocks by a risk-adjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional non-program short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results indicate that, on average, short sellers are important contributors to efficient stock prices.

Keywords: short selling, return predictability, informed trading

JEL Classification: G12, G14

Suggested Citation

Boehmer, Ekkehart and Jones, Charles M. and Zhang, Xiaoyan, Which Shorts are Informed? (February 4, 2007). AFA 2007 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=855044 or http://dx.doi.org/10.2139/ssrn.855044

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

Charles M. Jones

Columbia Business School ( email )

3022 Broadway
Uris Hall Rm 101
New York, NY 10027
United States
(212) 854-4109 (Phone)

HOME PAGE: http://https://www8.gsb.columbia.edu/cbs-directory/detail/cj88

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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