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Short selling and the rounding of analysts’ forecasts

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  • Choi, Hae Mi

Abstract

This paper examines the causal effect of short selling on analyst forecast precision by exploiting a regulatory change in short-sale constraints (Regulation SHO) as a natural experiment. I find that short selling increases analysts’ rounding of forecasts, which indicates that analysts allocate less effort to gathering precise information on firms with downward price pressure. In the cross-section, the effect of short selling on analyst forecast precision is stronger for firms with more firm-specific information and firms with low levels of institutional holdings.

Suggested Citation

  • Choi, Hae Mi, 2018. "Short selling and the rounding of analysts’ forecasts," Finance Research Letters, Elsevier, vol. 25(C), pages 47-54.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:47-54
    DOI: 10.1016/j.frl.2017.10.001
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    More about this item

    Keywords

    Short selling; Regulation SHO; Rounding; Earnings forecasts; Analysts;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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