When Do Informed Short Sellers Trade? Evidence from Intraday Data and Implications for Informed Trading Models
2021-11-17 16:12:00
Using intraday 2015-2019 short sale data, we examine the time patterns and information content of intraday shorting.  Midday short sales and those near the open strongly and negatively predict the cross-section of stock returns at daily horizons and up to 12 weeks ahead.  Short sales near the close are only informative at next-day horizons. We also connect earnings/analyst news to shorting flows. Shorting near the open reacts strongly to and anticipates bad-news releases. Shorting near the close only anticipates post-close firm news. Our evidence supports both Kyle (1985) and Holden and Subrahmanyam (1992).