SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM AN INFORMATION SHOCK

Paul A. Griffina; Hyun A. Hong; Ivalina Kalcheva; Jeong-Bon Kim

SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM AN INFORMATION SHOCK

Paul A. Griffina, Hyun A. Hong, Ivalina Kalcheva, Jeong-Bon Kim^*

^*Corresponding author for this work

Department of Accountancy

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

Abstract

Employing the international equity lending markets as a laboratory to capture private information revelation, we show that the ability of shorting to predict negative future stock returns drops after the public information shock of a mandatory accounting change, thus reducing short-sellers’ profitability. We also show that shorting profitability drops due to a decrease in investors’
divergence of opinion coincident with the public information shock. These results imply that the introduction of a mandatory accounting change that increases public information flow can crowd out short-sellers’ use of private information, consistent with a substitutional relation between public and private information.

Original language	English
Title of host publication	THIRTIETH ASIAN-PACIFIC CONFERENCE ON INTERNATIONAL ACCOUNTING ISSUES
Subtitle of host publication	PROGRAM & PROCEEDINGS
ISBN (Electronic)	2471-7274
Publication status	Published - Nov 2018
Event	30th Asia Pacific Conference on International Accounting Issue - San Francisco, United States Duration: 11 Nov 2018 → 14 Nov 2018

Conference

Conference	30th Asia Pacific Conference on International Accounting Issue
Country/Territory	United States
City	San Francisco
Period	11/11/18 → 14/11/18

Research Keywords

Equity lending market
Short selling
Equity return predictability
Information shock
Private and public information

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@inproceedings{b73e65fd9f20438e825cdaad8f3b7b7b,

title = "SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM AN INFORMATION SHOCK",

abstract = "Employing the international equity lending markets as a laboratory to capture private information revelation, we show that the ability of shorting to predict negative future stock returns drops after the public information shock of a mandatory accounting change, thus reducing short-sellers{\textquoteright} profitability. We also show that shorting profitability drops due to a decrease in investors{\textquoteright}divergence of opinion coincident with the public information shock. These results imply that the introduction of a mandatory accounting change that increases public information flow can crowd out short-sellers{\textquoteright} use of private information, consistent with a substitutional relation between public and private information. ",

keywords = "Equity lending market, Short selling, Equity return predictability, Information shock, Private and public information",

author = "Griffina, {Paul A.} and Hong, {Hyun A.} and Ivalina Kalcheva and Jeong-Bon Kim",

year = "2018",

month = nov,

language = "English",

isbn = "2471-7266",

booktitle = "THIRTIETH ASIAN-PACIFIC CONFERENCE ON INTERNATIONAL ACCOUNTING ISSUES",

note = "30th Asia Pacific Conference on International Accounting Issue ; Conference date: 11-11-2018 Through 14-11-2018",

}

SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM AN INFORMATION SHOCK. / Griffina, Paul A.; Hong, Hyun A.; Kalcheva, Ivalina et al.
THIRTIETH ASIAN-PACIFIC CONFERENCE ON INTERNATIONAL ACCOUNTING ISSUES: PROGRAM & PROCEEDINGS. 2018.

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

TY - GEN

T1 - SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY

T2 - 30th Asia Pacific Conference on International Accounting Issue

AU - Griffina, Paul A.

AU - Hong, Hyun A.

AU - Kalcheva, Ivalina

AU - Kim, Jeong-Bon

PY - 2018/11

Y1 - 2018/11

N2 - Employing the international equity lending markets as a laboratory to capture private information revelation, we show that the ability of shorting to predict negative future stock returns drops after the public information shock of a mandatory accounting change, thus reducing short-sellers’ profitability. We also show that shorting profitability drops due to a decrease in investors’divergence of opinion coincident with the public information shock. These results imply that the introduction of a mandatory accounting change that increases public information flow can crowd out short-sellers’ use of private information, consistent with a substitutional relation between public and private information.

AB - Employing the international equity lending markets as a laboratory to capture private information revelation, we show that the ability of shorting to predict negative future stock returns drops after the public information shock of a mandatory accounting change, thus reducing short-sellers’ profitability. We also show that shorting profitability drops due to a decrease in investors’divergence of opinion coincident with the public information shock. These results imply that the introduction of a mandatory accounting change that increases public information flow can crowd out short-sellers’ use of private information, consistent with a substitutional relation between public and private information.

KW - Equity lending market

KW - Short selling

KW - Equity return predictability

KW - Information shock

KW - Private and public information

M3 - RGC 32 - Refereed conference paper (with host publication)

SN - 2471-7266

BT - THIRTIETH ASIAN-PACIFIC CONFERENCE ON INTERNATIONAL ACCOUNTING ISSUES

Y2 - 11 November 2018 through 14 November 2018

ER -

SHORTING ACTIVITY AND STOCK RETURN PREDICTABILITY: EVIDENCE FROM AN INFORMATION SHOCK

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