Short Selling around Earnings Announcements Open Access

Abstract

Using a novel dataset spanning 2010 to 2023, this paper examines short selling surrounding earnings announcements, a setting where firms reveal value-relevant information, to compare the predictive and processing abilities of short sellers. Short sellers exhibit strong predictive abilities for earnings announcement period market reactions, rather than the earnings announcement news itself. I find no evidence that short sellers exhibit the ability to skillfully process the earnings announcement news. In addition, both pre- and post-announcement shorting for extremely positive earnings surprises positively predict future returns. In the case of earnings announcements, the findings suggest that short sellers’ predictive abilities are more successful than their processing abilities.

Table of Contents

I. Introduction 1

II. Background on Short Selling and Research Questions 5

III. Data and Sample Section 12

IV. Empirical Analysis 9

V. Conclusion 20

Appendix A: Variable Definitions 23

Appendix B: Firm-Day Sample Description 24

References 25

About this Master's Thesis

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School	Laney Graduate School
Department	Business
Subfield / Discipline	Accounting
Degree	M.S.
Submission	Master's Thesis
Language	English
Research Field	Business Administration, Accounting Economics, Finance
Keyword	earnings announcements short sales
Committee Chair / Thesis Advisor	Yohn, Teri, Emory University
Committee Members	Lyle, Matthew, Emory University Sridharan, Suhas, Emory University

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