S&O Monthly Seminar "Corporate frauds and listed firms' manipulations"

The S&O Institute is pleased to announce its next monthly seminar on Tuesday April 5th from 12.00 p.m. to 2.00 p.m., on HEC campus. 

For this session, devoted to Corporate frauds and listed firms' manipulations, we have a great honor to welcome two remarkable guests.   

Our first guest is Daniel Yu, Founder of Gotham City Research, which focuses on due-diligence based investing. Gotham City Research identifies public companies engaging in large-scale fraud. Gotham City Research takes short positions on these fraudulent companies and reveals them through detailed investigative reports to other investors.

Daniel will talk and exchange with us about Short Selling: The risks, opportunities, and role within financial markets 

During the 2nd part of the seminar, our academic guest Zhao, Wuyang from UT Austin, McCombs School of Business, will present his paper: Cost of Information Dissemination: Short Squeezes After Short-Selling Attacks (the abstract is here after).  

Title: Cost of Information Dissemination: Short Squeezes After Short-Selling Attacks 

Abstract: We study one cost of information dissemination by providing evidence of non-fundamentals-driven temporary price increases following short-selling attacks, where short sellers publicly disclose their negative information. After short attacks, about 30% of firms experience initially positive returns, but these positive returns are disproportionately likely to reverse, and positive-return-reversal stocks experience significantly heightened short covering. The combination of temporary positive price pressure and short covering is consistent with short squeezes. We estimate significant trading losses for short sellers as a result of these squeeze events but find they are difficult to predict (and thus avoid) ahead of time. Instead, our evidence suggests they may be triggered by conditions and firm actions on the day of the attack, including insider purchases. While prior research has focused on the ability of short attacks to reduce limits to arbitrage, we highlight non-fundamentals-driven price pressure as a material risk to this approach.