| Popis: |
High levels of short interest predict negative abnormal returns, but the reasons for this predictability are not well understood. Two popular explanations suggest very different interpretations. According to Miller (1977), stocks are overvalued in the presence of short-sale constraints, and the subsequent negative abnormal returns represent a correction of this overvaluation. Based on recent evidence in the accounting and microstructure literature, an alternative explanation is that short sellers are highly informed traders and short interest, therefore, predicts future returns due to its information content. We discriminate between the overvaluation and the information hypotheses and find support for the latter. Therefore, our evidence suggests that short sellers act as specialized monitors who generate value-relevant information in the stock market. |
