Michael McKenzie – research into short selling restrictions

Worldwide short selling: Regulations, activity, and implications is a topical and timely piece of research, with colleagues at the University of Memphis, which crunches the data to determine whether short sellers seek to profit from regulatory arbitrage in dual listed stocks following bans around the world. The findings show that short selling restrictions in one market impacted investor behavior in the other market – or put simply, a ban in short selling in Spain did not stimulate activity in the US listed ADR for the affected stocks. It seems that investors take a ban literally and do not seek to circumnavigate short selling restrictions by shorting secondary listings – something the European regulators may find comforting. Watch my brief video discussing this paper with Michael and you can download the full research here.

Earnings Announcements: Good news for Institutional Investors and Short Sellers. This paper seeks to establish who are the most informed investors in the market. Using corporate earning announcements as a benchmark, Michael was able contrast the Data Explorers institutional ownership holdings data against stock loan data, which he used as a reliable proxy of short selling activity. Access to daily Data Explorers data was crucial to determine institutional investor flow and short interest relative to market expectations ahead of and following earnings. His research concluded that institutional investors are the most informed ahead of earnings, perhaps because they have better access to the company? Whereas it is the short sellers, who can quickly process information, that have the advantage post-earnings. Click here to download the paper or here to watch my brief video discussion with Michael.

Our Academic & Research portal contains a comprehensive list of independent studies into all aspects of short selling. It includes two other interesting research papers by Michael: