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The short-selling skill of institutions and individuals: a market-wide and out-of-sample analysis

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  • Chague, Fernando Daniel
  • Bueno, Rodrigo de Losso da Silveira
  • Giovannetti, Bruno Cara

Abstract

Using market-wide data from the Brazilian stock lending market, we find strong evidence of short-selling skill for some institutions and individuals. Skilled short-sellers present out-of-sample performance persistence, both over time and across stocks. Performance persistence is robust: by randomly splitting the sample across stocks, we show that performance in a group of stocks often predicts performance in another group of stocks. We then study how skilled short-sellers trade. We find that most of their profit does not come from firm-specific private information, they follow short-term momentum strategies, and they do not display the disposition effect.

Suggested Citation

  • Chague, Fernando Daniel & Bueno, Rodrigo de Losso da Silveira & Giovannetti, Bruno Cara, 2018. "The short-selling skill of institutions and individuals: a market-wide and out-of-sample analysis," Textos para discussão 469, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    • Handle: RePEc:fgv:eesptd:469
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