Understanding the Information Content of Short Interests
Existing studies have debated on the information content and the predictive power on future stock returns of short interests—the number of shares of a stock sold short. We explore a unique institutional feature on the time lag between monthly recording of short interests and their public release to examine the information content and the predictive power of short interests. Using a matching approach, we find that the impact of the negative information content of short interests is more pronounced than previously documented, but only exists in the period before the short interest data is publicly released. Upon public release, short interests have no significant predictive power on future stock returns. Moreover, much of the previously documented negative abnormal return of the most heavily shorted portfolio formed on published short interests is largely due to the liquidity risk. In order to better reveal the potential negative information in short sale activities while considering the short sale constraints, we propose the binding ratio—a ratio between the short interest and the institutional ownership. We find that both short interest and binding ratio are closely related to forthcoming negative earnings surprises in the following month. However, only binding ratio reflect other potential negative information.
Short interests Binding ratio Return predictability Market efficiency
Yexiao Xu Harold H. Zhang Xin Zhou
School of Management, University of Texas at Dallas,Richardson, TX 75080 School of Management, Fudan University
国际会议
广州
英文
1-45
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）