Short-selling prior to analyst recommendations
Can QU
10.25440/smu.12292940.v1
https://researchdata.smu.edu.sg/articles/thesis/Short-selling_prior_to_analyst_recommendations/12292940
<table><tr>
<td><p>This paper
investigates short-selling five days prior to analyst recommendations by
using a complete data set from Reg SHO database during January, 2005 to July,
2007. Empirical tests uncover the evidence that short-sellers significantly
increase their short positions prior to negative analyst recommendations,
which is consistent with the informed trading hypothesis. This finding is
robust to model specification. Further, this paper also examines which of the
two competing hypotheses-prediction and tipping-could better explain
short-sellers’ informative front-running. The tests indicate that
short-sellers use book-to-market ratio as a filter to narrow down their pool
of candidates, while market capitalization doesn’t play a role in short-sellers’
decision process. However, earnings management seems to influence
short-sellers’ attitude towards analyst recommendations. For these
“aggressive” firms, short-selling transactions seem to deviate from analyst
recommendations, which imply that short-sellers may scrutinize the firms by
themselves rather than mechanically listen to analysts’ tips. This piece of
evidence tends to favor prediction hypothesis.</p></td></tr></table>
2020-05-13 09:53:07
short-selling
analyst recommendations
Finance