Keywords
short-sales, short-sellers, contrarian, Nasdaq
Abstract
We create proxies for constrained supply of lendable shares by combining unique data on loan fees, stock lending activity, and failures to deliver to examine how contrarian short-sale strategies are affected by constraints. Constraints affect roughly one-third of the cross- section of stocks and result in a significant reduction in the contrarian response of short sellers to past returns. When short sellers’ contrarian strategies are constrained, the market is significantly less efficient. Furthermore, the previously documented relation between short selling activity and future returns breaks down for the most constrained stocks.
Original Publication Citation
When Constraints Bind, 2018, with Ingrid M. Werner, Fisher College of Business Working Paper Series
BYU ScholarsArchive Citation
Diether, Karl B. and Werner, Ingrid M., "When Constraints Bind" (2011). Faculty Publications. 9205.
https://scholarsarchive.byu.edu/facpub/9205
Document Type
Peer-Reviewed Article
Publication Date
2011
Publisher
Fisher College of Business Working Paper Series
Language
English
College
Marriott School of Business
Department
Finance
Copyright Use Information
https://lib.byu.edu/about/copyright/