Short interest and the stock market relation with news sentiment from traditional and social media sources

Ben Chamberlain; Zhangxin (Frank) Liu; Lee A. A. Smales

doi:10.1111/1467-8454.12297

Short interest and the stock market relation with news sentiment from traditional and social media sources

Ben Chamberlain, Zhangxin (Frank) Liu, Lee A. A. Smales

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

We examine how the stock market relation to news sentiment-from traditional and social media (Twitter) sources-interacts with short selling of stocks. Our sample includes the S&P500 constituents for the period January 2016 to December 2020, providing 704,452 firm-day observations. We find evidence that both news sources are positively related to returns. The relationship is stronger for firms with a high short interest ratio, for small firms, and particularly for firms that are both small and highly shorted. This is consistent with short sellers targeting firms that are most responsive to (negative) news releases and so more likely to compensate for the additional costs encountered in shorting.

Original language	English
Pages (from-to)	321-334
Number of pages	14
Journal	Australian Economic Papers
Volume	62
Issue number	2
Early online date	12 Mar 2023
DOIs	https://doi.org/10.1111/1467-8454.12297
Publication status	Published - Jun 2023

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10.1111/1467-8454.12297Licence: CC BY-NC

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title = "Short interest and the stock market relation with news sentiment from traditional and social media sources",

abstract = "We examine how the stock market relation to news sentiment-from traditional and social media (Twitter) sources-interacts with short selling of stocks. Our sample includes the S&P500 constituents for the period January 2016 to December 2020, providing 704,452 firm-day observations. We find evidence that both news sources are positively related to returns. The relationship is stronger for firms with a high short interest ratio, for small firms, and particularly for firms that are both small and highly shorted. This is consistent with short sellers targeting firms that are most responsive to (negative) news releases and so more likely to compensate for the additional costs encountered in shorting.",

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AB - We examine how the stock market relation to news sentiment-from traditional and social media (Twitter) sources-interacts with short selling of stocks. Our sample includes the S&P500 constituents for the period January 2016 to December 2020, providing 704,452 firm-day observations. We find evidence that both news sources are positively related to returns. The relationship is stronger for firms with a high short interest ratio, for small firms, and particularly for firms that are both small and highly shorted. This is consistent with short sellers targeting firms that are most responsive to (negative) news releases and so more likely to compensate for the additional costs encountered in shorting.

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Short interest and the stock market relation with news sentiment from traditional and social media sources

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