Short Interest vs. Short Selling

26 Pages Posted: 20 Sep 2011

See all articles by Benjamin M. Blau

Benjamin M. Blau

Utah State University - Huntsman School of Business

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Date Written: September 20, 2011

Abstract

We examine the relation between the monthly reported short interest (the number of shares that are in outstanding short positions) and short selling. We aggregate transaction level short selling into monthly short turnover (a measure of the shorting flow) and find that short turnover and short interest have a correlation of slightly over 45%, which is much lower than our expectations. We also examine whether short interest and/or short selling are informative of future returns. We find that short selling (the shorting flow) shows evidence of predicting returns, while short interest does not. We also examine short selling around the announcement of monthly short interest. We find that short selling increases prior to the announcement of monthly short interest.

Keywords: Short Interest, Short Sales, Informed Trading

JEL Classification: G10, G14

Suggested Citation

Blau, Benjamin M. and Van Ness, Bonnie F. and Van Ness, Robert A., Short Interest vs. Short Selling (September 20, 2011). Available at SSRN: https://ssrn.com/abstract=1930997 or http://dx.doi.org/10.2139/ssrn.1930997

Benjamin M. Blau (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

Bonnie F. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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