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Full-Text Articles in Business
Short Selling And Economic Policy Uncertainty, Xiaping Cao, Yuchen Wang, Sili Zhou
Short Selling And Economic Policy Uncertainty, Xiaping Cao, Yuchen Wang, Sili Zhou
Research Collection Lee Kong Chian School Of Business
We study the trading behavior of short sellers in the presence of economic policy uncertainty (EPU). Daily short selling activity at either the aggregate level or the individual stock level is increasing in the EPU index (Baker, Bloom and Davis, 2016). EPU has great explanatory power for short trading. Cross-sectional tests show that the increase in short interest under high political uncertainty is from shorting stocks characterized by higher mispricing, greater policy sensitivity, higher illiquidity, greater volatility or analyst dispersion. Short sellers earn abnormal profits by trading on public information related to EPU.
Sensation-Seeking Hedge Funds, Stephen Brown, Yan Lu, Sugata Ray, Melvyn Teo
Sensation-Seeking Hedge Funds, Stephen Brown, Yan Lu, Sugata Ray, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a novel dataset of hedge fund manager automobile purchases, we show that, motivated by sensation seeking, hedge fund managers often take risk for personal and non-pecuniary reasons. In line with the sensation seeking view, managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios. Moreover, funds managed by performance car owners exhibit higher operational risk and are more likely to fail. Performance car owners demonstrate other attributes associated with sensation seeking, such as a preference for lottery-like stocks, unconventional strategies, and active trading.