Are Short Sellers Superior Traders?

Abstract

Using two practitioner measures of intraday trading skill, Boni and Rosen show that short sellers are little or no better than the average trader. Using the first measure, the authors find that short sellers beat the day’s volume-weighted average price by 4 basis points, or about 1.3 cents per share, on average. Using the second measure, the Kissell and Glantz [2003] relative performance measure, they find that short sellers are not measurably better than average. With the exception of short sales of stocks on the SEC’s September 18, 2008, Emergency Order ban list, the authors’ findings are robust for the different short-sale regulatory regimes that existed during the third quarter of 2008.