Title

Short Selling and Market Anomalies

Document Type

Article

Publication Date

7-15-2019

Publication Title

Journal of Financial Markets

First page number:

1

Last page number:

21

Abstract

We assess the importance of well-known market anomalies for shorting strategies and how it changes over the 1988–2014 period. We find that anomalies contribute to both relative short interest (RSI) and RSI's negative information content about future earnings surprises and analyst actions. Anomalies explain more than half of the RSI-return relation. These results neither attenuate over time nor vary with market sentiment. RSI on least-shorted firms contains unique return-predictive information, which becomes increasingly important over time while RSI on most-shorted firms does not. Our findings suggest that a significant portion of short sellers' informational advantage comes from exploiting market anomalies.

Keywords

Financial information; Market anomalies; Short selling

Disciplines

Economics | Finance

Language

English

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