Short-sellers: Informed but restricted

Chague, Fernando; De-Losso, Rodrigo; Genaro, Alan De; Giovannetti, Bruno

doi:10.1016/j.jimonfin.2014.04.001

Cited by 16 publications

(13 citation statements)

References 9 publications

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“…The results found do not confirm the previous studies that show the existence of short-sale constraints in Brazil (Bonomo et al, 2015;Chague et al, 2014Chague et al, , 2017. We believe that this difference results from the limited size of the studied series compared to international works.…”

Section: Resultscontrasting

confidence: 97%

“…The results presented do not follow the evidences existing in the Brazilian market (Bonomo et al, 2015;Chague et al, 2014Chague et al, , 2017, that is, it was not possible to confirm the existence of short-sale constraints through the analysis of Long-Short anomaly-based strategies. It must be said that the limited size of the studied series compared to international studies may have made it difficult to compare the Long and Short positions, periods of optimism and pessimism.…”

Section: Portfolio Performance Followed By Periods Of Optimism and Pecontrasting

confidence: 77%

“…After pessimistic periods, only five portfolios showed positive returns, and only four anomalies provided negative return on the difference between positive and negative returns. In addition, in no situation did the Short position show statistically significant returns, contradicting the findings of Stambaugh et al (2012) and, consequently, by analysis of the behavior of Long-Short anomaly-based portfolios and periods of optimism and pessimism, it is not possible to confirm the existence of short-sale constraints, according to previously documented evidences in Brazil (Bonomo et al, 2015;Chague et al, 2014Chague et al, , 2017.…”

Section: Portfolio Performance Followed By Periods Of Optimism and Pementioning

confidence: 68%

“…However, the low supply in the equity lending market prevent prices from reflecting all information available in the market. Corroborating the Miller's hypothesis (1977), there is evidence in the Brazilian market that the high levels of equity lending create constraints that affect stock prices (Bonomo, De Mello, & Mota, 2015;Chague, De-Losso, De Genaro, & Giovannetti, 2014.…”

Section: Introductionmentioning

confidence: 88%

“…2, e170028, 2017 www.anpad.org.br/bar Finally, in Brazil, there is evidence that short-sale constraints affect prices, thus causing overpricing. Chague, De-Losso, De Genaro and Giovannetti (2014) studied the effect of demand (shortsellers are informed) and supply (short-sellers are restricted) in the stock lending market on share prices and concluded that short sellers are well-informed, thus increasing the demand for equity lending. However, the low supply in the equity lending market prevent prices from reflecting all information available in the market.…”

Section: Introductionmentioning

confidence: 99%

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Anomalies and Investor Sentiment: Empirical Evidences in the Brazilian Market

Xavier

Machado

2017

BAR, Braz. Adm. Rev.

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This study examined the relationship between investor sentiment and value anomalies in Brazil. In addition, it analyzed if pricing deviations caused by investors with optimistic views are different from those caused by pessimistic investors. The sample included all non-financial firms listed on the B3 (Brasil, Bolsa, Balcão) stock exchange from July 1999 to June 2014. We used the Principal Component Analysis multivariate technique to capture the component common to four different proxies for investor sentiment. The study empirically tested the index series and its variation on the return series of Long-Short portfolios of 12 anomaly-based strategies. The study found that the measure of the sentiment index had a partial explanatory power for the anomalies only when included in the CAPM. Yet, when using the index sentiment changes as an explanatory variable, the study found a relationship with future returns, robust to all risk factors. Thus, it is possible to relate investor sentiment index to anomaly-based portfolio returns. When analyzing average returns after optimistic and pessimistic periods, the values we found in our empirical test were not statistically significant enough to infer the possible existence of short-sale constraints.

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Section: Resultscontrasting

confidence: 97%

Section: Portfolio Performance Followed By Periods Of Optimism and Pecontrasting

confidence: 77%

Section: Portfolio Performance Followed By Periods Of Optimism and Pementioning

confidence: 68%

Section: Introductionmentioning

confidence: 88%

Section: Introductionmentioning

confidence: 99%

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Anomalies and Investor Sentiment: Empirical Evidences in the Brazilian Market

Xavier

Machado

2017

BAR, Braz. Adm. Rev.

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Short‐selling costs and asymmetric price response to economic shocks: A transaction cost explanation to price overshooting

Ornelas

Carvalho

2020

Int. J Fin Econ

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We propose a model that combines performance‐based arbitrage, short‐sale constraints, and costly arbitrage. In the model, good earnings surprises trigger short‐covering causing price overshooting for highly shorted stocks. However, price overshooting is on average lower than short‐selling costs. Model predictions are empirically tested using Brazilian short‐selling data. We find empirical support for the short‐covering and overshooting phenomena. Furthermore, there is evidence that the intensity of overshooting is lower than the short‐selling borrowing fee, for both U.S. and Brazilian markets. Theoretical and empirical results suggest that arbitrageurs behave asymmetrically to good and bad earnings news.

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