IUPUI is Indiana's premier urban research university. The campus enrolls more than 30,000 students in 21 schools and academic units.
Glen Larsen
Professor
Kelley School of Business
glarsen@iupui.edu
The Information Content of Short Interest
In this paper, we review the mean-variance portfolio theory literature that supports short selling as an active portfolio management tool and the empirical literature that provides evidence of active short sellers having superior information about overpriced securities. What may not be clear is exactly how that information can be detected and analyzed. We, therefore, review the theoretical and empirical literature that investigates the information content of short interest. Finally, we document several methods used by portfolio managers to target short sale candidates.
