Short selling and exchange-traded funds returns: evidence from the London Stock Exchange

Mohamad, Azhar; Jaafar, Aziz; Goddard, John

doi:10.1080/00036846.2015.1076146

Cited by 8 publications

(7 citation statements)

References 19 publications

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“…While Lynch, et al (2014) focus on whether short selling predicts overall market direction, we focus on the relative performance of sectors. Our findings that contrarian strategies might be profitable extend the research of Mohamad, Jaafar, and Goddard (2016). They examine a measure of daily short interest for ETFs traded on the London Stock Exchange.…”

Section: Introductionsupporting

confidence: 70%

Do Daily Short Sales Forecast S&P 500 Sector Returns?

Boni

Majadillas²

2017

JFI

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We examine the data for S&P 500 firms for 2009 to 2012 to determine whether daily short selling, aggregated at the industry sector level, forecasts relative returns. Prior research documents short sellers as skilled fundamental analysts and information processors at the individual security level and in aggregate as forecasters of short-term market direction. Intriguingly, we find not only that sector-aggregated daily short sale information does not correctly forecast the short-term relative performance of industry sectors but rather that somecontrarian strategies that are short the least shorted sectors and long the most shorted sectors are profitable on average.

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Section: Introductionsupporting

confidence: 70%

Do Daily Short Sales Forecast S&P 500 Sector Returns?

Boni

Majadillas²

2017

JFI

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“…An exchange traded fund (ETF) is a security that tracks a portfolio of stocks in the ETF’s benchmark index ( Mohamad, Jaafar, & Goddard, 2016 ). ETFs can act as investment tools characterized by low transaction costs and high intraday liquidity.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

All that glitters is not gold. The rise of gaming in the COVID-19 pandemic

López‐Cabarcos

Soriano

Chousa

2020

Journal of Innovation & Knowledge

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The COVID-19 pandemic has led to an unprecedented situation, with incalculable health, social, and economic consequences. At the start of the outbreak, the financial markets collapsed, although not all sectors suffered equally. The gaming and eSports industry is one of those that has suffered the least from the fall in the markets. Millions of people locked up at home, bored, stressed, and anguished, gave gaming and eSports companies growing prominence throughout the first half of 2020. This prominence has elicited interest in analyzing which variables can influence the returns in an industry in better financial health than many others. Using a logit–probit model, this research aims to analyze the relationship between financial (VIX, S&P GSCI Gold Index) and social (worldwide daily variation in total deaths from COVID-19 and worldwide Google attention on coronavirus) variables and the returns offered by the video game and eSports exchange traded fund (ESPO). The results show that the influence of social variables is weaker than the influence of financial variables. There is a significant inverse relationship between market volatility and ESPO returns and a highly significant relationship between ESPO returns and gold returns. While the relationship of ESPO returns with worldwide Google attention on coronavirus is significant, the relationship with worldwide daily variation in total deaths from COVID-19 is not. The conclusions of the study are discussed at the end of the paper.

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“…Other researchers find inconsistencies in the overvaluation hypothesis. Mohamad et al (2016) find that high levels of short interest in ETFs are associated with over-performance. Best et al (2008) find that there are significant increases in short interest prior to large, negative returns, but they find even higher levels of short interest prior to large, positive returns.…”

Section: Introductionmentioning

confidence: 80%

“…High short interest levels help price efficiency by dampening the price inflation of the stock and stopping it from becoming too overvalued. Mohamad et al (2016) find evidence of high short interest leading to over-performance. Their study was of ETFs, and they suggested the results were due to hedging strategies.…”

Section: Literature Reviewmentioning

confidence: 87%

Short interest in mergers: anomalies in the overvaluation hypothesis

Davis

Coy²,

Solis³

2018

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Purpose High short interest is associated with overvaluation, and the purpose of this paper is to find contradictions to the commonly held “overvaluation hypothesis” when merger and acquisition (M&A) targets are examined. This paper extends the work of Ben-David et al. (2015), who confirm high short interest indicates overvaluation when focused on acquiring firms. Design/methodology/approach Short interest is examined as a predictor of acquisition likelihood using longitudinal data for US firms from 2003 to 2013. How short interest impacts the premiums paid by acquiring firms is examined with target, acquirer and deal characteristics. Findings M&A targets have high short interest and short interest increases acquisition likelihood, suggesting undervaluation. Highly shorted firms also experience outsized reductions in share price prior to merger announcements, and the premiums paid are also significantly predicted by short interest levels. Research limitations/implications Short selling activity can be motivated for reasons other than overvaluation, and many short positions can be held for long periods before they are closed, leading to high short interest levels for extended periods. Therefore, investors and researchers are cautioned that high short interest levels may exist in stocks that have already declined in price and could be poised for a reversal. Originality/value This study adds to the growing body of work indicating that short interest might not be the signal of overvaluation most researchers accept it to be.

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Short selling and exchange-traded funds returns: evidence from the London Stock Exchange

Cited by 8 publications

References 19 publications

Do Daily Short Sales Forecast S&P 500 Sector Returns?

Do Daily Short Sales Forecast S&P 500 Sector Returns?

All that glitters is not gold. The rise of gaming in the COVID-19 pandemic

Short interest in mergers: anomalies in the overvaluation hypothesis

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