Are Short-Sellers Different?
46 Pages Posted: 4 Mar 2008 Last revised: 23 Dec 2019
There are 2 versions of this paper
Are Short-Sellers Different?
Are Short-Sellers Different?
Date Written: April 17, 2008
Abstract
While theoretical models strongly suggest that short-sales are mainly driven by private information, recent empirical evidence of has been rather mixed. This paper contributes to the discussion by looking at various potential motives to sell short and compares these with regular buys and sales with regards to variation in the information contents and timing of short-sales. We find that short-sellers have different private information than regular buyers and sellers, which seems to have a longer life-time, being related to previous buying pressure. The information advantage of short-sellers seems originating from skilled analysis of publicly available data rather than corporate insider information. Short-sales provide an important stabilizing role by providing liquidity in periods of uninformed buying pressure. Overall, we find that short-sales are driven by multiple trade motives, which sets short-sellers apart from regular buyers and sellers.
Keywords: Short-selling, Information asymmetry, Microstructure
JEL Classification: G14, G19
Suggested Citation: Suggested Citation
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