An investigation of the informational role of short interest in the Nasdaq market

Hemang Desai, K. Ramesh, S. Ramu Thiagarajan, Bala V. Balachandran

Research output: Contribution to journalArticlepeer-review

265 Scopus citations

Abstract

This paper examines the relationship between the level of short interest and stock returns in the Nasdaq market from June 1988 through December 1994. We find that heavily shorted firms experience significant negative abnormal returns ranging from -0.76 to -1.13 percent per month after controlling for the market, size, book-to-market, and momentum factors. These negative returns increase with the level of short interest, indicating that a higher level of short interest is a stronger bearish signal. We find that heavily shorted firms are more likely to be delisted compared to their size, book-to-market, and momentum matched control firms.

Original languageEnglish (US)
Pages (from-to)2263-2287
Number of pages25
JournalJournal of Finance
Volume57
Issue number5
DOIs
StatePublished - Jan 1 2002

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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