Hong, Harrison; Kubik, Jeffrey D.; Fishman, Tal - In: Journal of Financial Economics 103 (2012) 3, pp. 454-470
We test the hypothesis that arbitrageurs amplify economic shocks in equity markets. The ability of speculators to hold short positions depends on asset values. Shorts are often reduced following good news about a stock. Therefore, the prices of highly shorted stocks are excessively sensitive to...