Are Predictive and Reactive Short Sellers Similarly Informed About Earnings Announcements?

2011 ◽  
Author(s):  
Gordon J. Alexander ◽  
Mark A. Peterson ◽  
Xiaoxin Wang Beardsley
Keyword(s):  
Earnings Announcements ◽  
Short Sellers

The Incremental Value Relevance of Media Coverage of Earnings Announcements: Evidence from the Trading of Short Sellers

2021 ◽  
Author(s):  
Lynn Rees ◽  
Brady Twedt
Keyword(s):  
Media Coverage ◽  
Price Discovery ◽  
Value Relevance ◽  
Earnings Announcements ◽  
Discovery Process ◽  
Trading Behavior ◽  
Earnings Announcement ◽  
Short Sellers ◽  
The Media ◽  
Price Discovery Process

We investigate the relation between media coverage and the trading behavior of short sellers around earnings announcements. Prior research provides conflicting evidence on the role of the media, with some studies finding that the media can impede the price discovery process. Our evidence indicates that short sellers increase their activity in line with the tone of media coverage around earnings announcements, after controlling for earnings news and other factors that affect relative levels of short selling. Furthermore, we show that information in the media successfully forecasts earnings information in the days leading up to the earnings announcement, and that short sellers trade in a manner consistent with information reflected in media coverage preceding the earnings announcement. Our findings are consistent with information contained in the media having value relevance, and suggest that the media may help to facilitate the price discovery process around the release of earnings.

Short-Selling and Information Arrival around Earnings Announcements: Evidence from Regulation SHO

2021 ◽  
Author(s):  
Greg Clinch ◽  
Wei Li
Keyword(s):  
Stock Prices ◽  
Earnings Announcements ◽  
Public Information ◽  
Short Selling ◽  
Price Informativeness ◽  
The Public ◽  
Short Sellers ◽  
Information Release ◽  
Negative News ◽  
Shed Light

Short sellers assist in impounding negative news more quickly into stock prices and improve price informativeness. However, there is a lack of consistent evidence about whether short sellers trade predominantly in anticipation of, or in response to, a public information release. To shed light on this question, we exploit Reg SHO, which reduced the constraints faced by short sellers for a subsample of U.S. firms, to examine price informativeness before, during and after earnings announcements. We show that relative to control firms, pilot firms have greater (less) price informativeness before (during) earnings announcements, suggesting that short sellers trade in anticipation of public earnings news, rather than in response to the public news.

scholarly journals The Strategic Responses from Sophisticated Investors to Inaccurate Forecast of Financial Analysts

2018 ◽  
Vol 7 (1) ◽  
pp. 272
Author(s):  
Kuo-Hao Lee ◽  
Loreen M. Powell ◽  
Lam Nguyen ◽  
Evren Eryilmaz
Keyword(s):  
Information Quality ◽  
Earnings Announcements ◽  
Financial Analysts ◽  
Cash Flows ◽  
Strategic Responses ◽  
Short Sellers ◽  
Unexpected Earnings ◽  
New Information ◽  
Informed Traders ◽  
Trading Activities

We examine whether there are more information based trading activities that are generated around the time of earnings announcements. We distinguish between the influence of information based traders, especially short sellers, and market information quality through the reaction of participants to new information derived from corporate earnings announcements. We find that informed traders do take advantage of overpriced stocks, and do short stocks before the confirmation of past expectations of future cash flows from corporates. We apply Standardized Unexpected Earnings (SUE) in the method and our result indicates that informed traders are more likely to take advantage of overpriced stocks, using a tool (shorting) that is not traditionally used by unsophisticated investors. We also demonstrate an unique finding that informed traders follow stock analysts not for investing advice, but to take advantage of those unsophisticated investors that buy in to the rhetoric expressed by financial analysts.

The puzzling behavior of short sellers around earnings announcements

2014 ◽  
Vol 23 (2) ◽  
pp. 255-278 ◽  
Author(s):  
Gordon J. Alexander ◽  
Mark A. Peterson ◽  
Xiaoxin Wang Beardsley
Keyword(s):  
Earnings Announcements ◽  
Short Sellers
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