International Finance Discussion Papers (IFDP)
November 2015
Why Do Short Sellers Like Qualitative News?
Bastian von Beschwitz, Oleg Chuprinin, and Massimo Massa
Abstract:
Short sellers trade more on days with qualitative news--i.e. news containing fewer numbers. We show that this behavior is not informationally motivated but can be explained by short sellers exploiting higher liquidity on such days. We document that liquidity and noise trading increase in the presence of qualitative news thus enabling short sellers to better disguise their informed trades. Natural experiments support our findings. For example, qualitative news has a bigger effect on short sellers' trading after a decrease in liquidity following a stock's deletion from S&P 500 and a lower effect when investor attention is distracted by the Olympic Games.
Keywords: Short Selling, Information, Liquidity
DOI: http://dx.doi.org/10.17016/IFDP.2015.1149
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