Which Shorts Are Informed?
Article first published online: 1 APR 2008
2008 by The American Finance Association
The Journal of Finance
Volume 63, Issue 2, pages 491–527, April 2008
How to Cite
BOEHMER, E., JONES, C. M. and ZHANG, X. (2008), Which Shorts Are Informed?. The Journal of Finance, 63: 491–527. doi: 10.1111/j.1540-6261.2008.01324.x
- Issue published online: 1 APR 2008
- Article first published online: 1 APR 2008
We construct a long daily panel of short sales using proprietary NYSE order data. From 2000 to 2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that shorting constraints are not widespread. As a group, these short sellers are 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 nonprogram 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.