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Best Short

Author

Listed:
  • Kosowski, Robert
  • Della Corte, Pasquale
  • Rapanos, Nikolaos

Abstract

We infer investors' expectations about future stock returns through a measure of short conviction that exploits net short positions disclosed at the investor-stock level for European stock markets. A strategy that sells high-conviction stocks and buys low-conviction stocks, named Best Short, generates a risk-adjusted excess return that is larger than 8% per annum and differs from the performance of traditional strategies based on aggregate short interest. Its profitability, moreover, cannot be explained by transaction costs, stock characteristics, frictions in the securities lending market, leverage constraints, and measures of price inefficiency.

Suggested Citation

  • Kosowski, Robert & Della Corte, Pasquale & Rapanos, Nikolaos, 2021. "Best Short," CEPR Discussion Papers 16319, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16319
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    File URL: https://cepr.org/publications/DP16319
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    More about this item

    Keywords

    Disclosure; Regulation; Short-sale performance; Anomalies; Hedge funds;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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