Discussion paper

DP13788 Active Short Selling by Hedge Funds

Short selling campaigns by hedge funds have become increasingly common in the last decade. Using a hand-collected sample of 252 campaigns, we document abnormal returns for targets of approximately -7% around the announcement date. Firm stakeholders, including the media, plaintiffs' attorneys, and other short sellers, play an important role in campaigns. Changes in aggregate short interest do not drive the effects on firm value and stakeholder behavior. Campaigns are primarily undertaken by activist hedge funds. Evidence suggests disclosure costs and information are important channels through which activism technology affects short selling.


Appel, I, J Bulka and V Fos (2019), ‘DP13788 Active Short Selling by Hedge Funds‘, CEPR Discussion Paper No. 13788. CEPR Press, Paris & London. https://cepr.org/publications/dp13788