, Volume 31, Issue 1, pp 33-48

Ownership structure, expectations, and short sales on the Nasdaq

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Abstract

We estimate expected short interest for Nasdaq stocks. Extending prior work, our research is among the first to investigate the impact of ownership structure on short-selling activity. We find that short interest is negatively related to institutional ownership and positively related to inside ownership; stocks with greater liquidity and smaller relative spreads are more heavily shorted. We also develop a measure of the unanticipated level of short selling; relative to the reported amount of short interest, this unexpected level of short selling seems at first to better represent the opinions of informed investors engaging in costly short-selling activities. However, the power of the unanticipated level of short-selling factor is displaced when we make allowances for traditional market, firm-size, and momentum variables.