Price Discovery in the Corporate Bond Market: The Informational Role of Short Interest

This paper identifies a precursory role of short sellers in conveying adverse information to the corporate bond market. Professor Paul Griffin and co-author Hyun A. Hong from the University of Memphis study this in two ways: by examining subsequent calendar month excess (risk-adjusted) bond returns for portfolios formed on the basis of high short interest in a prior month, and by analyzing abnormal short interest and daily bond returns around earnings announcements.

This paper won Overall Best Paper out of over 90 submissions at the 2012 Financial Markets and Corporate Governance Conference hosted by La Trobe University in Melbourne, Australia.