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Are Japanese short sellers information detectives?

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  • Lee, Bong-Soo
  • Ko, Kwangsoo

Abstract

Using Japanese long sample data, we examine whether short sales are informed trades about future stock returns, whether they contribute to future lower stock prices, and whether short sales are related to overvaluation of the market. We find that short interests do not cause lower future stock market returns permanently. However, we find that short interest not only responds to a past temporary decline in returns but also anticipates and contributes to future temporary changes in returns—a decline in the short run but an increase in the long run. Further, Japanese short sales tend to take advantage of current overvaluation.

Suggested Citation

  • Lee, Bong-Soo & Ko, Kwangsoo, 2014. "Are Japanese short sellers information detectives?," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 89-97.
    • Handle: RePEc:eee:jjieco:v:34:y:2014:i:c:p:89-97
    DOI: 10.1016/j.jjie.2014.05.002
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    Cited by:

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    2. Khan, Mostafa Saidur Rahim & Bremer, Marc & Kato, Hideaki Kiyoshi, 2018. "Are short-sales constraints binding when there is a centralized lendable securities market? Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 85-96.

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    More about this item

    Keywords

    Short sale; Informed trade; Overvaluation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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