Short-selling and exchange traded funds returns: Evidence from the London Stock Exchange

John Goddard, Azhar Mohamad, Aziz Jaafar

Research output: Contribution to journalArticlepeer-review

7 Citations (SciVal)


An exchange-traded fund (ETF) is a security that tracks a basket of stocks. An ETF investor gains immediate exposure to the basket, by taking either a long or short position on this instrument. Both hedgers and speculators can short ETFs, making the informational content of increases in ETF short interest difficult to interpret. Using high-frequency (daily) short-interest data for ETFs traded on the London Stock Exchange between June 2006 and April 2010, we examine the price impact on ETFs of increases in short interest. Contrary to most of the previous empirical evidence for individual stocks, we find that large increases in ETF short interest are associated with subsequent over-performance relative to a benchmark index and this pattern is most pronounced during pre-financial crisis period.
Original languageEnglish
Pages (from-to)152-164
Number of pages13
JournalApplied Economics
Issue number2
Early online date11 Sept 2015
Publication statusPublished - 2016
Externally publishedYes


  • short selling
  • short interest
  • exchange-traded funds
  • abnormal returns
  • hedging


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