Short seller attention

Abstract

This paper exploits the complex information setting of customer-supplier links to assess revealed short-seller attention. Results suggest that short sellers are attentive to the news of corporate customers to short their suppliers’ stocks. This short selling behavior strengthens with co-attention, as proxied by same-day downloads of both customer and supplier SEC disclosure documents by the same investor. Our findings indicate that such short sales predict negative future returns on suppliers’ stocks, suggesting that sophisticated investors trade profitably by focusing their attention on a complicated information setting.