Role of Short Sellers in Price Formation - The Weekend Effect

2002 ◽  
Author(s):  
Honghui Chen ◽  
Vijay Singal
Keyword(s):  
Weekend Effect ◽  
Price Formation ◽  
Short Sellers

scholarly journals Short sellers: Villains or scapegoats?

2011 ◽  
Vol 8 (2) ◽  
pp. 391-401
Author(s):  
Robert Wearing ◽  
Carmen A. Li
Keyword(s):  
Financial Markets ◽  
Stakeholder Theory ◽  
News Media ◽  
Share Price ◽  
Empirical Literature ◽  
Information Function ◽  
Share Prices ◽  
Short Sellers ◽  
High Share

This paper discusses the role of short sellers and the concerns which are expressed in the news media about their activities. In particular, it examines the problem of optimism in analysts’ forecasts which might initially lead to ‘high’ share prices and the limitations of both agency and stakeholder theory in providing short sellers with a legitimate role. With the help of the existing empirical literature, we argue that short sellers can be regarded as carrying out a useful information function in financial markets. Indeed, encouraging short sellers to operate more effectively in the market as well as requiring fuller disclosure of their activities could provide a useful antidote to some of the share price rises which have been seen in recent years in failing companies

The Information Intermediary Role of Short Sellers

2005 ◽  
Vol 80 (3) ◽  
pp. 941-966 ◽  
Author(s):  
Grace Pownall ◽  
Paul J. Simko
Keyword(s):  
Relative Size ◽  
Analyst Following ◽  
Earnings Expectations ◽  
Short Sellers ◽  
Future Performance ◽  
Information Intermediaries ◽  
Intermediary Role ◽  
Short Interest ◽  
Alternative Sources

This paper examines the conditions under which the market responds to disclosures of significant increases in short selling, and whether proxies for earnings expectations and alternative information sources help explain this response. Our sample is based on firms that experience abnormal short interest increases (“short spikes”) during 1989–1998. We find that the mean abnormal return around short spike announcements is significantly more negative for firms with low analyst following, consistent with short sellers providing perceived value when there are limited alternative sources of guidance available. For firms with high analyst following we find the market response is dependent on earnings levels, consistent with investors viewing a short interest increase as providing information about the sustainability of earnings. Additional analyses reveal that these inferences are not affected by measures of firms' earnings quality or by the relative size of the short spike. We infer from our analyses that the information content of short interest disclosures is conditional on both the firms' existing information environment and expectations of future performance as conveyed by prior earnings. This inference is consistent with short sellers' role as information intermediaries covering the lower tail of earnings expectations.

Doing battle with short sellers: The conflicted role of blockholders in bear raids

2012 ◽  
Vol 106 (2) ◽  
pp. 229-246 ◽  
Author(s):  
Naveen Khanna ◽  
Richmond D. Mathews
Keyword(s):  
Short Sellers
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