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- Title
Early Movers Advantage? Evidence from Short Selling during After‐Hours on Earnings Announcement Days.
- Authors
Jain, Archana; Jain, Chinmay; Jiang, Christine X.
- Abstract
We examine short sellers' after‐hours trading (AHT) following quarterly earnings announcements released outside of the normal trading hours. Our innovation is to use the actual short trades immediately after the announcements. We find that on these earnings announcement days, there is significant shorting activity in AHT relative to shorting activity both during AHT on nonannouncements days and during regular trading sessions around announcements. Short sellers who trade after‐hours on announcement days earn an excess return of 0.82% and 1.40% during before‐market‐open (BMO) and after‐market‐close (AMC)sessions, respectively. The magnitude of these returns increases to 1.48 (3.92%) for BMO (AMC) earnings announcements with negative surprise. We find that the reactive short selling during AHT has information in predicting future returns. Short sellers' trades have no predictive power if they wait for the market to open to trade during regular hours. In addition, we find that the weighted price contribution during AHT increases with an increase in after‐hours short selling. Overall, our results suggest that short sellers in AHT are informed. Our findings remain robust using alternative holding periods and after controlling for macroeconomic news announcements during BMO sessions.
- Subjects
SHORT selling (Securities); AFTER hours trading systems; QUARTERLY reports; CORPORATE profits; MACROECONOMICS
- Publication
Financial Review, 2019, Vol 54, Issue 2, p235
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/fire.12174