How are Shorts Informed? Short Sellers, News, and Information Processing

Posted: 13 Jan 2010 | Last revised: 9 Oct 2012

Joseph Engelberg
University of California, San Diego (UCSD) – Rady School of Management

Adam V. Reed
University of North Carolina Kenan-Flagler Business School

Matthew C. Ringgenberg
University of Utah – Department of Finance

Abstract

We find that a substantial portion of short sellers’ trading advantage comes from their ability to analyze publicly available information. Using a database of short sales combined with a database of news releases, we show that the well-documented negative relation between short sales and future returns is twice as large on news days and four times as large on days with negative news. Further, we find that the most informed short sales are not from market makers but rather from clients, and we find only weak evidence that short sellers anticipate news events. Overall, the evidence suggests that public news provides valuable trading opportunities for short sellers who are skilled information processors.

 

Mutual Funds involve risk including the possible loss of principal. Investors should carefully consider the investment objectives, risks, charges and expenses of the funds managed by Counterpoint Mutual Funds. This and other important information about the funds is available in their prospectuses, which can be obtained at counterpointfunds.com or by calling 844-273-8637. The prospectuses should be read carefully before investing. The Counterpoint Mutual Funds fund family is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. To reach the Counterpoint sales team, please refer to our contact page. 

 

Thank you!

We’ve received your request for the featured event collateral. A Counterpoint Funds team member will be in touch shortly.

Subscribe to stay up to date on and receive our monthly perspective.

Thank you!

We’ve received your meeting request and a Counterpoint Funds team member will be in touch shortly.

Subscribe to stay up to date on and receive our monthly perspective.

Thank you!

We’ve received your event registration request and will be in touch shortly.

Subscribe to stay up to date on Counterpoint Funds and receive our monthly perspective.

Thank you!

We have received your application and look forward to reviewing your qualifications for the role. If your application seems like a good fit, we will contact you to discuss next steps.

Thank you again for your application and interest in joining the Counterpoint team!

Thank you!

We’ve received your message. A Counterpoint Funds team member will contact you soon.

Subscribe to stay up to date and receive our monthly perspective.