RT Journal Article
SR Electronic
T1 The Impact of Short Selling in the Cross-Section of Corporate Bond Returns
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 61
OP 81
DO 10.3905/jfi.2022.1.147
VO 32
IS 3
A1 Desislava Vladimirova
A1 Thomas Markl
A1 Philip Messow
YR 2022
UL https://pm-research.com/content/32/3/61.abstract
AB This article fills the literature gap by employing the longest yet-analyzed period and introduces multiple short selling proxies to explain the relationship between short selling information and bond performance. We examine short selling signals derived from bond and equity markets and find both to be predictive of future corporate bond returns after optimization, especially for high yield securities. Additionally, we find the combination of equity and bond short selling signals to be superior to individual factors, generating positive alpha even after costs. The performance of a blended signal is robust against volatility in down markets, such as the COVID-19 pandemic.