WHY INVESTORS WANT TO KNOW THE SIZE OF YOUR SHORTS

Stephen E. Christophe ； Michael G. Ferri, Emeritus ； Jim Hsieh

《Advances in Investment Analysis and Portfolio Management》 9期 (2019/12) Pp. 69-112

https://doi.org/10.6291/AIAPM.201912_9.0004

摘要

We explore whether knowing the identity of the market participant who initiates a short position (speculator versus dealer) is essential for understanding the implications of short trade size for subsequent stock returns. We find that large speculative short trades tend to be followed by returns that are more negative, whereas the opposite holds for large dealer short trades. A portfolio formed by going short the stocks where the average size of the day's speculative short trades is large and long the stocks where it is small generates five-day returns ranging from 0.40% to 1.34%. In contrast, for dealers an opposite trading strategy (going long the stocks where the average size of the day's dealer short trades is largest and short the stocks where it is smallest) generates five-day returns ranging from 0.31% to 0.94%. In addition, we examine how past and contemporaneous returns affect the size of speculative and dealer short trades. We conclude that a daily stock-by-stock report that discloses the average size of short trades and the percentage of the day's trades that were short, broken out separately by category of market participant, could provide investors with value-relevant information for pricing securities.

關鍵字

Short Selling ； Trade Size ； Speculative Trading ； Market Making ； Portfolio Returns

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