Feb

24

I'm not sure which prof (Charles or Alex) was mentioning shorting the cost of certain stock at 60% ++ in one of the posts, but I found this interesting paper on the subject: "The Shorting Premium and Asset Pricing Anomalies".

Here is a two line summary of the paper:

1. The cheap-minus-expensive-to-short (CME) portfolio of stocks has an average monthly gross return of 1.45%, a 0.92% net return, and a 1.55% four-factor alpha

2. Top decile stocks by shorting premium (cheap to short) returned an average of 0.75% (gross) and 0.11 % (net) in the next one month, while bottom decile (expensive to short) returned -0.71% (gross) and -0.17% (net).


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  1. Andrew Goodwin on February 26, 2014 3:10 am

    The results of shorting the highest short interest NYSE stocks have been covered in some academic papers. The authors I’ve read left out the borrow costs as the poster astutely points out. Rather than an academic anomaly, this supposed inefficiency looks more like a short squeeze trap mechanism.

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