Fighting the Shorts Academic studies continue to find that stocks targeted by short sellers tend to underperform.
As professor Lee Smales and co-authors note in a March paper published online by the Australian Economic Papers: “More recent research shows that short sellers are informed traders that make correct predictions to earn higher returns. As such, they are important contributors to market efficiency.”
Shareholders in companies with significant short positions or changes – see the following tables sourced from S3 Partners – are thus well advised to make sure their due diligence is solid.
A highlight from Table I is the huge jump of $2.1-billion in short interest for the Royal Bank of Canada . This was a 77.1-per-cent increase from March. As of April 27, 2.7 per cent of RBC’s float was sold short, up sharply from 1.7% in March.
The Bank of Montreal and Toronto-Dominion Bank also had large increases in their short positions: $823.3-million and $445.4-million, respectively.