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Short-Sellers: Informed but Restricted

Author

Listed:
  • Fernando D. Chague

  • Rodrigo De-Losso, Alan De Genaro, Bruno C. Giovannetti

Abstract

According to theory, the level of short-selling can predict short-run future returns throughout two channels. One is related to the demand-side of the stock lending market: short-sellers are informed. The other is related to the supply-side: short-sellers are restricted. Measuring the importance of each channel is empirically challenging once, in general, supply and demand in the stock lending market are not directly observable. This paper takes advantage of a unique dataset that contains actual shifts in lending supply for stocks on the Brazilian market, and proposes an identification strategy for the effects of both supply and demand on stock prices. We find that both channels are important

Suggested Citation

  • Fernando D. Chague & Rodrigo De-Losso, Alan De Genaro, Bruno C. Giovannetti, 2013. "Short-Sellers: Informed but Restricted," Working Papers, Department of Economics 2013_05, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2013wpecon5
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    Citations

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    Cited by:

    1. José Renato Haas Ornelas & Pablo José Campos de Carvalho, 2021. "Short‐selling costs and asymmetric price response to economic shocks: A transaction cost explanation to price overshooting," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1745-1772, April.
    2. Fernando Chague & Bruno Giovannetti & Bernardo Guimaraes, 2021. "The Contrarian Put," Discussion Papers 2106, Centre for Macroeconomics (CFM).
    3. Fernando Chague & Rodrigo De Losso, Bruno Giovannetti, 2017. "Uncovering Skilled Short-sellers," Working Papers, Department of Economics 2017_01, University of São Paulo (FEA-USP).
    4. Chague, Fernando & De-Losso, Rodrigo & Giovannetti, Bruno, 2019. "The short-selling skill of institutions and individuals," Journal of Banking & Finance, Elsevier, vol. 101(C), pages 77-91.
    5. Yang, Xiaoqi & Vagnani, Gianluca & Dong, Yan & Ji, Xu, 2024. "Short selling and firms’ long-term stock return volatility: Evidence from Chinese concept stocks in Hong Kong," Finance Research Letters, Elsevier, vol. 70(C).
    6. Guimaraes, Bernardo & Pannella, Pierluca, 2024. "Short-covering bubbles," Journal of Economic Theory, Elsevier, vol. 219(C).
    7. Márcio Gomes Pinto Garcia & Marcelo Cunha Medeiros & Francisco Eduardo de Luna e Almeida Santos, 2014. "Economic gains of realized volatility in the Brazilian stock market," Brazilian Review of Finance, Brazilian Society of Finance, vol. 12(3), pages 319-349.
    8. Daniel Sales Casula & Rodrigo De-Losso, 2019. "Short Selling, the supply side: are lenders price makers?," Working Papers, Department of Economics 2019_53, University of São Paulo (FEA-USP).
    9. Fernando Chague & Rodrigo De-Losso, Alan De Genaro, Bruno Giovannetti, 2015. "Why Do Different Short-sellers Pay Different Loan Fees? A Market-wide Analysis," Working Papers, Department of Economics 2015_17, University of São Paulo (FEA-USP).
    10. 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).
    11. de Genaro, Alan & Avellaneda, Marco, 2019. "Does the Lending Rate Impact ETF's Prices?," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 38(2), January.
    12. de Genaro, Alan & Avellaneda, Marco, 2018. "Does the Lending Rate Impact ETF's Prices?," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 38(2).
    13. José Renato Haas Ornelas & Pablo José Campos de Carvalho, 2015. "The Cost of Shorting, Asymmetric Performance Reaction and the Price Response to Economic Shocks," Working Papers Series 383, Central Bank of Brazil, Research Department.
    14. Chague, Fernando & De-Losso, Rodrigo & De Genaro, Alan & Giovannetti, Bruno, 2017. "Well-connected short-sellers pay lower loan fees: A market-wide analysis," Journal of Financial Economics, Elsevier, vol. 123(3), pages 646-670.

    More about this item

    Keywords

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    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

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