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Market-Based Solutions to Vital Economic Issues
Research
Mar 2, 2015

Revealing Shorts: An Examination of Large Short Position Disclosures

Abstract

By 2012, all European Union countries began requiring the disclosure of large short positions. This regime change reduced short interest, bid-ask spreads, and the informativeness of prices. After specific disclosures, short-run abnormal returns are insignificantly negative, but 90-day cumulative abnormal returns are –5.23%. We find disclosures are likely to be followed by other disclosures, especially when the initial discloser is large or centrally located, but there is no subsequent increase in short interest, and prices do not subsequently reverse. These results indicate that large short sellers are well-informed, and that disclosures are not being used to coordinate manipulative attacks.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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