Equity short selling and bond rating downgrades
We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. In the month before a rating downgrade, equity short interest is 40% higher than one year prior. Short sellers predict changes in default probabilities that lead to down...
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| Veröffentlicht in: | Journal of financial intermediation 2015-01, Vol.24 (1), p.89-111 |
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| container_end_page | 111 |
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| container_issue | 1 |
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| container_title | Journal of financial intermediation |
| container_volume | 24 |
| creator | Henry, Tyler R. Kisgen, Darren J. Wu, Juan (Julie) |
| description | We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. In the month before a rating downgrade, equity short interest is 40% higher than one year prior. Short sellers predict changes in default probabilities that lead to downgrades by focusing on firms with inaccurate or biased ratings. This strategy is profitable for short sellers primarily since downgrades are associated with significantly negative equity returns. Short sellers also facilitate price discovery by reducing abnormal stock returns following downgrades and by leading bond yield spreads. |
| doi_str_mv | 10.1016/j.jfi.2014.02.005 |
| format | Article |
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Short sellers also facilitate price discovery by reducing abnormal stock returns following downgrades and by leading bond yield spreads.</description><identifier>ISSN: 1042-9573</identifier><identifier>EISSN: 1096-0473</identifier><identifier>DOI: 10.1016/j.jfi.2014.02.005</identifier><language>eng</language><publisher>San Diego: Elsevier BV</publisher><subject>Bond ratings ; Bonds ; Credit rating ; Credit spreads ; Enterprises ; Equity funds ; Probability ; Securities markets ; Short sales ; Stock returns ; Studies</subject><ispartof>Journal of financial intermediation, 2015-01, Vol.24 (1), p.89-111</ispartof><rights>2014 Elsevier Inc.</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c440t-47ba312952f36b0ed900e92076bcff983e5f76b20dfc4e1d9d2969d2ccb52c9a3</citedby><cites>FETCH-LOGICAL-c440t-47ba312952f36b0ed900e92076bcff983e5f76b20dfc4e1d9d2969d2ccb52c9a3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><link.rule.ids>314,780,784,27924,27925</link.rule.ids></links><search><creatorcontrib>Henry, Tyler R.</creatorcontrib><creatorcontrib>Kisgen, Darren J.</creatorcontrib><creatorcontrib>Wu, Juan (Julie)</creatorcontrib><title>Equity short selling and bond rating downgrades</title><title>Journal of financial intermediation</title><description>We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. 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Short sellers also facilitate price discovery by reducing abnormal stock returns following downgrades and by leading bond yield spreads.</description><subject>Bond ratings</subject><subject>Bonds</subject><subject>Credit rating</subject><subject>Credit spreads</subject><subject>Enterprises</subject><subject>Equity funds</subject><subject>Probability</subject><subject>Securities markets</subject><subject>Short sales</subject><subject>Stock returns</subject><subject>Studies</subject><issn>1042-9573</issn><issn>1096-0473</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2015</creationdate><recordtype>article</recordtype><recordid>eNpdkE1Lw0AQhhdRsFZ_gLeAFy9JZz_TPUqpVSh40fOy2Y-a0Gbb3QTpv3dDPXl55x14GIYHoUcMFQYsFl3V-bYigFkFpALgV2iGQYoSWE2vp85IKXlNb9FdSh0AxoKxGVqsT2M7nIv0HeJQJLfft_2u0L0tmpAj6mHabfjpd1Fbl-7Rjdf75B7-5hx9va4_V2_l9mPzvnrZloYxGEpWN5piIjnxVDTgrARwkkAtGuO9XFLHfe4ErDfMYSstkSKHMQ0nRmo6R8-Xu8cYTqNLgzq0yeT3dO_CmBQWgkpgeEkz-vQP7cIY-_xdpjjNFiQlmcIXysSQUnReHWN70PGsMKhJoepUVqgmhQqIygrpL9HAY7s</recordid><startdate>20150101</startdate><enddate>20150101</enddate><creator>Henry, Tyler R.</creator><creator>Kisgen, Darren J.</creator><creator>Wu, Juan (Julie)</creator><general>Elsevier BV</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20150101</creationdate><title>Equity short selling and bond rating downgrades</title><author>Henry, Tyler R. ; Kisgen, Darren J. ; Wu, Juan (Julie)</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c440t-47ba312952f36b0ed900e92076bcff983e5f76b20dfc4e1d9d2969d2ccb52c9a3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2015</creationdate><topic>Bond ratings</topic><topic>Bonds</topic><topic>Credit rating</topic><topic>Credit spreads</topic><topic>Enterprises</topic><topic>Equity funds</topic><topic>Probability</topic><topic>Securities markets</topic><topic>Short sales</topic><topic>Stock returns</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Henry, Tyler R.</creatorcontrib><creatorcontrib>Kisgen, Darren J.</creatorcontrib><creatorcontrib>Wu, Juan (Julie)</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of financial intermediation</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Henry, Tyler R.</au><au>Kisgen, Darren J.</au><au>Wu, Juan (Julie)</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Equity short selling and bond rating downgrades</atitle><jtitle>Journal of financial intermediation</jtitle><date>2015-01-01</date><risdate>2015</risdate><volume>24</volume><issue>1</issue><spage>89</spage><epage>111</epage><pages>89-111</pages><issn>1042-9573</issn><eissn>1096-0473</eissn><abstract>We examine whether short sellers identify firms that have significant changes in default likelihoods and credit rating downgrades. In the month before a rating downgrade, equity short interest is 40% higher than one year prior. Short sellers predict changes in default probabilities that lead to downgrades by focusing on firms with inaccurate or biased ratings. This strategy is profitable for short sellers primarily since downgrades are associated with significantly negative equity returns. Short sellers also facilitate price discovery by reducing abnormal stock returns following downgrades and by leading bond yield spreads.</abstract><cop>San Diego</cop><pub>Elsevier BV</pub><doi>10.1016/j.jfi.2014.02.005</doi><tpages>23</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 1042-9573 |
| ispartof | Journal of financial intermediation, 2015-01, Vol.24 (1), p.89-111 |
| issn | 1042-9573 1096-0473 |
| language | eng |
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| source | Elsevier ScienceDirect Journals Complete |
| subjects | Bond ratings Bonds Credit rating Credit spreads Enterprises Equity funds Probability Securities markets Short sales Stock returns Studies |
| title | Equity short selling and bond rating downgrades |
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