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Which Shorts Are Informed?

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  • EKKEHART BOEHMER
  • CHARLES M. JONES
  • XIAOYAN ZHANG

Abstract

We construct a long daily panel of short sales using proprietary NYSE order data. From 2000 to 2004, shorting accounts for more than 12.9% of NYSE volume, suggesting that shorting constraints are not widespread. As a group, these short sellers are well informed. Heavily shorted stocks underperform lightly shorted stocks by a risk‐adjusted average of 1.16% over the following 20 trading days (15.6% annualized). Institutional nonprogram short sales are the most informative; stocks heavily shorted by institutions underperform by 1.43% the next month (19.6% annualized). The results indicate that, on average, short sellers are important contributors to efficient stock prices.

Suggested Citation

  • Ekkehart Boehmer & Charles M. Jones & Xiaoyan Zhang, 2008. "Which Shorts Are Informed?," Journal of Finance, American Finance Association, vol. 63(2), pages 491-527, April.
    • Handle: RePEc:bla:jfinan:v:63:y:2008:i:2:p:491-527
    DOI: 10.1111/j.1540-6261.2008.01324.x
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