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Autocorrelation in daily short-sale volume

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  • Blau, Benjamin M.
  • Smith, Jason M.

Abstract

While Diether, Lee, and Werner (2009) find that daily shorting activity is serially correlated, this study uses more formal tests and finds significant first-order autocorrelation in daily short volume. Contrary to prior research that suggests that autocorrelation in total trade volume is explained by the flow of information into prices, our tests indicate that the information contained in short sales is decreasing in the level of autocorrelation. In additional tests, we do not find that short-sale constraints explain the presence of autocorrelation. However, our tests do provide evidence that the level of autocorrelation in daily short volume is highest in stocks that are least liquid suggesting that illiquidity might explain the presence of autocorrelation.

Suggested Citation

  • Blau, Benjamin M. & Smith, Jason M., 2014. "Autocorrelation in daily short-sale volume," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 31-41.
    • Handle: RePEc:eee:quaeco:v:54:y:2014:i:1:p:31-41
    DOI: 10.1016/j.qref.2013.07.011
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    2. Benjamin Blau & Tyler J. Brough, 2012. "Concentrated short‐selling activity: bear raids or contrarian trading?," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 8(3), pages 187-203, June.

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