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dc.contributor.authorMazouz, K.
dc.contributor.authorWu, Yuliang
dc.date.accessioned2021-11-10T13:30:43Z
dc.date.accessioned2021-11-25T09:42:13Z
dc.date.available2021-11-10T13:30:43Z
dc.date.available2021-11-25T09:42:13Z
dc.date.issued2022-01
dc.identifier.citationMazouz K and Wu Y (2022) Why do firm fundamentals predict returns? Evidence from short selling activity. International Review of Financial Analysis. 79: 101974.en_US
dc.identifier.urihttp://hdl.handle.net/10454/18648
dc.descriptionYesen_US
dc.description.abstractThis 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.en_US
dc.language.isoenen_US
dc.publisherElsvier
dc.relation.isreferencedbyhttps://doi.org/10.1016/j.irfa.2021.101974en_US
dc.rights© 2022 Elsevier. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/)en_US
dc.subjectF-scoreen_US
dc.subjectShort sellingen_US
dc.subjectMispricingen_US
dc.subjectSHOen_US
dc.titleWhy do firm fundamentals predict returns? Evidence from short selling activityen_US
dc.status.refereedYesen_US
dc.date.Accepted2021-11-05
dc.date.application2021-11-18
dc.typeArticleen_US
dc.date.EndofEmbargo2023-05-18
dc.type.versionAccepted manuscripten_US
dc.description.publicnotesThe full-text of this article will be released for public view at the end of the publisher embargo on 18 May 2023.en_US
dc.date.updated2021-11-10T13:30:44Z
refterms.dateFOA2021-11-25T09:42:36Z
dc.openaccess.statusGreenen_US


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