Abstract
Unlike in other developed equity markets, short sellers in Australia are required to report their covered short positions on a daily basis to the market regulator, who subsequently disseminates this information freely to the public in a very timely manner. If short selling contains negative information, a strategy that longs (shorts) stocks with low (high) short selling interest should result in positive returns. This study examines the profitability of such a strategy, named the short selling interest momentum trading strategy. The results indicate that significant returns can be made by following short sellers’ actions ex post. Further, stronger returns are made from price momentum winner stocks and short sellers behave rationally towards short selling activities. The findings from this study are robust to various controls relating to size, industry, price momentum and options.
| Original language | English |
|---|---|
| Pages (from-to) | 296-306 |
| Number of pages | 11 |
| Journal | International Review of Financial Analysis |
| Volume | 63 |
| DOIs | |
| Publication status | Published - May 2019 |
Keywords
- Anomaly
- Behaviour
- Momentum
- Short selling
- Trading strategy
Cite this
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Down but not out : plenty of returns available for shorted down stocks. / Galariotis, Emilios; Li, Bob; Chai, Daniel.
In: International Review of Financial Analysis, Vol. 63, 05.2019, p. 296-306.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Down but not out
T2 - plenty of returns available for shorted down stocks
AU - Galariotis, Emilios
AU - Li, Bob
AU - Chai, Daniel
PY - 2019/5
Y1 - 2019/5
N2 - Unlike in other developed equity markets, short sellers in Australia are required to report their covered short positions on a daily basis to the market regulator, who subsequently disseminates this information freely to the public in a very timely manner. If short selling contains negative information, a strategy that longs (shorts) stocks with low (high) short selling interest should result in positive returns. This study examines the profitability of such a strategy, named the short selling interest momentum trading strategy. The results indicate that significant returns can be made by following short sellers’ actions ex post. Further, stronger returns are made from price momentum winner stocks and short sellers behave rationally towards short selling activities. The findings from this study are robust to various controls relating to size, industry, price momentum and options.
AB - Unlike in other developed equity markets, short sellers in Australia are required to report their covered short positions on a daily basis to the market regulator, who subsequently disseminates this information freely to the public in a very timely manner. If short selling contains negative information, a strategy that longs (shorts) stocks with low (high) short selling interest should result in positive returns. This study examines the profitability of such a strategy, named the short selling interest momentum trading strategy. The results indicate that significant returns can be made by following short sellers’ actions ex post. Further, stronger returns are made from price momentum winner stocks and short sellers behave rationally towards short selling activities. The findings from this study are robust to various controls relating to size, industry, price momentum and options.
KW - Anomaly
KW - Behaviour
KW - Momentum
KW - Short selling
KW - Trading strategy
UR - http://www.scopus.com/inward/record.url?scp=85059868776&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2018.12.006
DO - 10.1016/j.irfa.2018.12.006
M3 - Article
VL - 63
SP - 296
EP - 306
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
ER -