Short Selling Around the 52-Week and Historical Highs
61 Pages Posted: 3 Apr 2016 Last revised: 31 May 2018
Date Written: 2016
Abstract
Although the distance of a stock price to its past price high does not provide fundamental-related information, it plays an important role of anchoring investors' expectations about the performance of stocks. Using a stock's 52-week and historical highs, we examine the impact of the nearness to these price highs on short sellers’ trading behavior in the U.S. equity market. We find that short selling is negatively associated with the nearness of the price to the 52-week high, while it is positively associated with the nearness to the historical high. This suggests that short sellers exploit other investors’ behavioral biases.
Keywords: Short selling, anchoring bias, 52-week high, historical high, overreaction, underreaction
JEL Classification: G12, G14
Suggested Citation: Suggested Citation