Does Short Selling Amplify Price Declines or Align Stocks with Their Fundamental Values?

• 成果类型: Article
• 署名作者: Curtis, Asher; Fargher, Neil L.
• 署名单位: University of Washington; University of Washington Seattle; Australian National University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1872
• 发表日期: 2014
• 页码: 2324-2340
• 关键词: Short selling; price declines; Fundamental analysis; Market regulation

摘要

Critics of short selling argue that short sellers amplify price declines by targeting firms with falling prices in an unwarranted manner. Contrary to this viewpoint, we find that increases in short interest for firms following a price decline are associated with measures of overpricing based on financial statement analysis. Our results extend to short-selling activity following marketwide declines. We also find evidence consistent with the profitability of short selling following price declines being driven by valuation-based positions. Overall, our findings suggest short sellers primarily undertake valuation-based strategies following price declines and have implications for regulators. Limiting short selling following price declines is likely to impede efficient price discovery.