Academic Research Insight: Industry Herding by Short Sellers Signals that Conditions are Changing
Do short sellers exploit industry information?...MORE, including the answers to queries 1 & 2 and why it matters
What are the research questions?
- Zsuzsa R. Huszár, Ruth S.K. Tan, Weina Zhang
- Journal of Empirical Finance
- A version of this paper can be found here
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What are the Academic Insights?
- Does the industry concentration exhibited in short sellers’ holdings convey new material information about the industry?
- Are the excess returns obtained from industry shorting combined with firm-specific shorting strategies explained by risk?
- Is the industry shorting signal correlated with economic trends in the associated industry?
- YES. The results reported here are consistent with previous studies. Heavily shorted industries consist of larger stocks with low transactions costs and larger book-to-market ratios with higher dispersion. Short sellers also focus on industries that are less concentrated with fewer dominant firms, but firms with greater informational complexity....