The short-selling skill of institutions and individuals

Abstract

Using market-wide data from the Brazilian stock lending market, we nd strong evidence of short-selling skill among institutions and individuals. Skilled short-sellers present out-of-sample performance persistence, both over time and across stocks. Performance persistence is robust: by randomly splitting the sample across stocks, we show that performance in a group of stocks often predicts performance in another group of stocks. We then study how skilled short-sellers trade. We nd that most of their pro t does not come from rm-speci c private information, they follow short-term momentum strategies, and they do not display the disposition effect