The puzzling behavior of short sellers around earnings announcements

Alexander, Gordon J.; Peterson, Mark A.; Beardsley, Xiaoxin Wang

doi:10.1016/j.jfi.2013.09.002

Cited by 11 publications

(11 citation statements)

References 44 publications

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“…Alexandar, Peterson and Beardsley () study reactive short selling during RTH after the announcement. Short sellers have the ability to trade in AHT and we have shown in our earlier sections that they do take advantages of the window of opportunity to short before regular sessions start.…”

Section: Methodology and Resultsmentioning

confidence: 99%

“…We create after-hours trading (AHT) reactive short selling quintiles based on before-market-open and after-market-close (BMO/AMC) short selling (as a percentage of shares outstanding following Alexandar, Peterson and Beardsley, 2014). We also create quintiles based on reactive and predictive short selling during regular trading hours (RTH) as a percentage of shares outstanding.…”

Section: Reactive Versus Predictive Short Sellingmentioning

confidence: 99%

“…Studying a large sample of news events (including earnings), the more recent work of Engelberg, Reed and Ringgenberg () finds that short sellers’ trading advantages come mainly from their ability to analyze publicly available information. Alexander, Peterson and Beardsley () examine predictive and reactive short sellers who short, respectively, on the day before and the day after quarterly earnings announcements and report that reactive short sellers earn significantly greater profits than predictive short sellers do. Since short sellers are generally considered informed agents (Boehmer, Jones and Zhang, ) and their trades made after news releases are more profitable, we expect short sellers to be interested in short selling immediately after the news releases.…”

Section: Introductionmentioning

confidence: 99%

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Early Movers Advantage? Evidence from Short Selling during After‐Hours on Earnings Announcement Days

Jain

Jiang

2019

The Financial Review

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We examine short sellers’ after‐hours trading (AHT) following quarterly earnings announcements released outside of the normal trading hours. Our innovation is to use the actual short trades immediately after the announcements. We find that on these earnings announcement days, there is significant shorting activity in AHT relative to shorting activity both during AHT on nonannouncements days and during regular trading sessions around announcements. Short sellers who trade after‐hours on announcement days earn an excess return of 0.82% and 1.40% during before‐market‐open (BMO) and after‐market‐close (AMC)sessions, respectively. The magnitude of these returns increases to 1.48 (3.92%) for BMO (AMC) earnings announcements with negative surprise. We find that the reactive short selling during AHT has information in predicting future returns. Short sellers’ trades have no predictive power if they wait for the market to open to trade during regular hours. In addition, we find that the weighted price contribution during AHT increases with an increase in after‐hours short selling. Overall, our results suggest that short sellers in AHT are informed. Our findings remain robust using alternative holding periods and after controlling for macroeconomic news announcements during BMO sessions.

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Section: Methodology and Resultsmentioning

confidence: 99%

Section: Reactive Versus Predictive Short Sellingmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Early Movers Advantage? Evidence from Short Selling during After‐Hours on Earnings Announcement Days

Jain

Jiang

2019

The Financial Review

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“…All three are informed, but clearly, information asymmetry exists. Institutional investors-the biggest investors in U.S. equities holding approximately 75 percent of U.S. stocks (Alexander, Peterson, Beardsley 2014)-are known to have superior research skills. They trade based on information about upcoming events only if the expected profit is higher than the cost of obtaining the private information (Admati and Pfleiderer 1988).…”

Section: List Of Tablesmentioning

confidence: 99%

“…ISO represent 31% of the volume and 38% of trades in my sample. Fully integrated in September 2007, ISO are mainly used by informed institutional traders to sweep multiple markets of their liquidity, although possibly at an inferior price (Chakravarty, Jain, Upson, and Wood 2012) I also analyze the trading activities of short sellers, which account for approximately 26% of the daily volume (Alexander, Peterson, Beardsley 2014), to determine if these sophisticated traders can benefit from repurchase announcements.…”

Section: Datamentioning

confidence: 99%

Institutional Investors, Insiders and the Firm

Nguyen¹

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This dissertation is comprised of three chapters that focus on three topics related to institutional investors' and registered insiders' trading activities around corporate announcements. This research provided insights into the trading behavior of institutions and insiders around corporate events when they are influenced by the anticipation and arrival of new information. Data samples were stratified, regression models were estimated, and control variables were added to ensure the results are significant and robust. The first chapter discussed the information signaling hypothesis around share repurchase announcements. I examined if institutions can trade profitability around the announcement time using signals from insiders and the firm. I found that only transient institutional investors are able to adjust their portfolios to take advantage of the postannouncement price run-up. The second chapter explored the relationship between information asymmetry and the information acquisition process. It appeared that institutions prefer using lower cost, small, round lot, 100-share multiples when they can acquire information in advance of the event as in earnings announcements. The last chapter looked at if the information hierarchy hypothesis holds true at the very top of the corporate pyramid. I found that CEO trades are largely ignored and president net purchases have vi positive effects on M&A post-announcement returns. In summary, institutions, insiders, and the firm play important roles in the information dissemination and acquisition process. Hence, their decisions have profound effects on their complicated, interconnected relationships. vii

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Short sale disclosure rules: an information story

Fong

2024

Rev Quant Finan Acc

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The puzzling behavior of short sellers around earnings announcements

Cited by 11 publications

References 44 publications

Early Movers Advantage? Evidence from Short Selling during After‐Hours on Earnings Announcement Days

Early Movers Advantage? Evidence from Short Selling during After‐Hours on Earnings Announcement Days

Institutional Investors, Insiders and the Firm

Short sale disclosure rules: an information story

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