Short selling efficiency

• 成果类型: Article
• 署名作者: Chen, Yong; Da, Zhi; Huang, Dayong
• 署名单位: Texas A&M University System; Texas A&M University College Station; Mays Business School; University of Notre Dame; University of North Carolina; University of North Carolina Greensboro
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.08.006
• 发表日期: 2022
• 页码: 387-408
• 关键词: Short selling efficiency; Return predictability; Mispricing; market efficiency

摘要

Short selling efficiency (SSE), measured each month by the slope coefficient of cross sectionally regressing abnormal short interest on a mispricing score, significantly and negatively predicts stock market returns both in-sample and out-of-sample, suggesting that mispricing gets corrected after short sales are executed on the right stocks. We show conceptually and empirically that SSE has favorable predictive ability over aggregate short interest, as SSE reduces the effect of noises in short interest and better captures the amount of aggregate short selling capital devoted to overpricing. The predictive power is stronger during the periods of recession, high volatility, and low public information. In addition, low SSE precedes the months when the CAPM performs well and signals an efficient market. Overall, our evidence highlights the importance of the disposition of short sales in stock markets. (C) 2021 Elsevier B.V. All rights reserved.