Aggregate Short Interest and Return Predictability
2014; RELX Group (Netherlands); Linguagem: Inglês
10.2139/ssrn.2474930
ISSN1556-5068
AutoresDavid E. Rapach, Matthew C. Ringgenberg, Guofu Zhou,
Tópico(s)Credit Risk and Financial Regulations
ResumoWe show that short interest is arguably the strongest known predictor of aggregate stock returns. It outperforms a host of popular return predictors both in and out of sample, with annual r-squared statistics of 12.89% and 13.24%, respectively. In addition, short interest can generate utility gains of over 300 basis points per annum for a mean-variance investor. A vector autoregression decomposition shows that the economic source of short interest’s predictive power stems predominantly from a cash flow channel. Overall, our evidence indicates that short sellers are informed traders who are able to anticipate future aggregate cash flows and associated market returns.
Referência(s)