Abstract
We use short selling data from Data Explorers from 2004 to 2012 to investigate the extent to which UK short sellers are informed investors, in accordance with Diamond and Verrecchia's (1987) hypothesis. Our results suggest that heavily-shorted stocks fail to consistently underperform their lightly-shorted counterparts. Short sellers' ability to predict firm performance is limited to firms that struggle for survival, such as firms about to enter bankruptcy or financial firms during the financial crisis. These results provide new evidence regarding the source of short-sellers' information and should be of interest to academics, financial regulators and market participants.
| Original language | English |
|---|---|
| Pages (from-to) | 1403-1417 |
| Number of pages | 15 |
| Journal | Journal of Business Finance and Accounting |
| Volume | 39 |
| Issue number | 9-10 |
| DOIs | |
| Publication status | Published - Nov 2012 |
| Externally published | Yes |
Keywords
- Bankrupt firms
- Financial crisis
- Informed trading
- Short sellers
ASJC Scopus subject areas
- Accounting
- Business, Management and Accounting (miscellaneous)
- Finance