可预测性
经济
理性预期
市场效率
风险溢价
金融经济学
计量经济学
货币经济学
量子力学
物理
标识
DOI:10.1016/j.irfa.2021.101974
摘要
This study uses short selling activity to test whether the relation between fundamentals and future returns is due to rational pricing or mispricing. We find that short sellers target firms with fundamental performance below market expectations. We also show that short selling activity reduces the return predictability of fundamentals by speeding up the price adjustments to negative fundamental signals. To further investigate whether the returns earned by short sellers reflect rational risk premia or mispricing, we exploit a natural experiment, namely Regulation of SHO, which creates exogenous shocks to short selling by temporarily relaxing short-sale constraints. Evidence from the experiment confirms that the superior returns to short sellers result from exploiting overpricing. Overall, our study suggests that the return predictability of fundamentals reflects mispricing rather than rational risk premia. • We use short selling activity to test whether the relation between fundamentals and future returns is due to rational pricing or mispricing. • Short sellers target firms with fundamental performance below market expectations and short selling activity reduces the return predictability of fundamentals. • A natural experiment, namely Regulation of SHO, confirms that the superior returns to short sellers result from exploiting overpricing. • Overall, the results of our study suggest that the return predictability of fundamentals reflects mispricing rather than rational risk premia.
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