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Project Investigators: Pedro Saffi, Oguzhan Karakas and Mehrshad Motahari
Abstract
Abstract
Short selling is a financial transaction that allows investors to profit from a decline in an asset's price. It involves borrowing an asset, selling it, and later buying it back at a lower price. Short sellers are known for their ability to forecast underperformance (Cohen et al., 2007), rapidly process public information, and uncover private information (Karpoff & Lou, 2010). This paper investigates whether short sellers can profit from negative ESG (environmental, social, and governance) news and the firms associated with such news. We expect that short sellers will not only be able to anticipate negative ESG news long in advance, but also assess the news's importance and adjust their trading activities accordingly.
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