TY - JOUR
T1 - Earnings Shocks, Price Responses, and Short Selling Behavior
AU - Choy, Siu Kai
AU - Zhang, Hua
N1 - Funding Information:
The authors would like to thank Brian Lucey (the Editor), an anonymous referee, Vyacheslav Fos, Gerald Lobo, and Haoxiang Zhu for comments. The authors would like to thank financial support from King's College London and the CUHK Business School Direct Grant from the Chinese University of Hong Kong .
Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2021/11
Y1 - 2021/11
N2 - Existing researches usually study short sellers’ behavior along a single dimension such as earnings news without considering the implications of multiple signals. In this paper, we investigate short selling behavior at earnings announcement period by using the shorting data from the Regulation SHO pilot program for the period January 2005 to July 2007. First, we document that, in about one third of our sample, earnings surprises and corresponding market price changes have opposite signs. By investigating how short sellers trade when earnings shocks and market price responses are of opposite signs, we find that there are more short selling activities when the market responds positively to negative earnings surprises; and that there are fewer short selling activities when the market responds negatively to positive earnings surprises. Overall, the shorting intensity at announcement period depends on both the earnings shock and price response signals.
AB - Existing researches usually study short sellers’ behavior along a single dimension such as earnings news without considering the implications of multiple signals. In this paper, we investigate short selling behavior at earnings announcement period by using the shorting data from the Regulation SHO pilot program for the period January 2005 to July 2007. First, we document that, in about one third of our sample, earnings surprises and corresponding market price changes have opposite signs. By investigating how short sellers trade when earnings shocks and market price responses are of opposite signs, we find that there are more short selling activities when the market responds positively to negative earnings surprises; and that there are fewer short selling activities when the market responds negatively to positive earnings surprises. Overall, the shorting intensity at announcement period depends on both the earnings shock and price response signals.
UR - http://www.scopus.com/inward/record.url?scp=85119979970&partnerID=8YFLogxK
U2 - https://doi.org/10.1016/j.irfa.2021.101939
DO - https://doi.org/10.1016/j.irfa.2021.101939
M3 - Article
SN - 1057-5219
VL - 78
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 101939
ER -