Daily short interest, idiosyncratic risk, and stock returns

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• 作者：Andrea S. Au ; John A. Doukas ; Zhan Onayev
• 关键词：Short-sale ; Idiosyncratic risk
• 刊名：Journal of Financial Markets
• 出版年：2009
• 期刊代码：48_13864181
• 类别：bus
• 出版时间：May 2009
• 卷：12
• 期：2
• 页码：290-316
• 文件大小：473 K

摘要

This paper examines the relation between short selling and returns and the impact of arbitrage costs on short sellers’ behavior. Using daily UK short selling data, we find that stocks with low short interest levels experience significant positive returns on both an equal- and value-weighted basis. Economic theory predicts that short sellers avoid establishing positions in stocks with high idiosyncratic risk. Our results indicate a negative relation between short interest and returns among high idiosyncratic risk stocks and that short selling activity is mostly concentrated in low idiosyncratic risk stocks where it is less costly to arbitrage fundamental risk.