Abstract
We examine intraday patterns in short sales and document the trading activity of short sellers. We find a U-shaped intraday pattern in short sales across the trading day. This pattern is robust to controlling for short trade size, market capitalization, and institutional ownership. We also find a positive association between short selling and past returns across the trading day, and this result is more pronounced in the first and last half hours of the day. Meanwhile, a trading strategy based on intraday short sales generates the highest returns at the open of the trading day. Overall, the results suggest that high levels of short sales at the market open are attributed to strategic trading by informed short sellers. High levels of effective spreads and volatility at the open also support our findings.
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