Research

My author page on SSRN:

http://papers.ssrn.com/author=334628

Working Papers

1) Does Stock Manipulation Distort Corporate Invesment? The Role of Short Selling Costs and Share Repurchases (with Murillo Campello and Rafael Matta), 2016.

Our model shows that the relationship between investment and the short selling costs is non-linear. We describe how everything changes once firms are allowed to repurchase shares. (Old version presented at the 2015 EFA (Vienna), the 2016 AFA (San Francisco), and the FIRS 2017 Conference (Hong Kong).

 

2) Power Grab: Activists, Short Sellers, and Disagreement

(with Tao Li and Daheng Yang), 2020.

We study events in which activist hedge funds and short sellers target the same stock, using European data on activism and mandatory disclosures of large short positions. The likelihood of activist targeting and the probability of a successful campaign are higher in the presence of large short sellers, with an even larger effect when investor disagreement is high. However, hedge fund activism does not affect the likelihood of a large short position. Using a calendar-time portfolio approach, we show that hedge fund activism generates higher abnormal returns when large short sellers are present, especially when activists achieve their stated goals. 2018 INQUIRE Europe Research Award


3) Shareholder-Creditor Conflicts and Limits to Arbitrage: Evidence From the Equity Lending Market

(with Yongqiang Chu, Luca Lin, and Jason Sturgess), 2021.

We study events in which activist hedge funds and short sellers target the same stock, using European data on activism and mandatory disclosures of large short positions. The likelihood of activist targeting and the probability of a successful campaign are higher in the presence of large short sellers, with an even larger effect when investor disagreement is high. However, hedge fund activism does not affect the likelihood of a large short position. Using a calendar-time portfolio approach, we show that hedge fund activism generates higher abnormal returns when large short sellers are present, especially when activists achieve their stated goals.


Published Articles

1) Short Sales Constraints and the Diversification Puzzle (with Adam Reed and Ed van Wesep), 2021, Management Science, 67(2), 661-1328.

We build a model showing that investors disagree less about the value of a conglomerate than about each of its individual divisions, generating a conglomerate discount: conglomerates have lower differences of opinion and lower short-sales constraints than pure-play firms. Furthermore, greater differences of opinion and tighter short-sales constraints are significant predictors of valuation differences between conglomerates and pure plays. Presented at the FIRS 2017 conference.


2)Deleveraging Risk (with Scott Richardson and Kari Sigurdsson), 2017, Journal of Financial and Quantitative Analysis, 52(6), 2491-2522.

Surprisingly, highly shorted stocks tend to have extreme positive returns during times of funding illiquidity.  Winner, Inquire Europe Award and 2015 Crowell Third Prize. Best Paper at the FMA Consortium for European Finance Faculty. Presented at the EFA 2013 and AFA 2014.

 

3) The Big Short: Short Selling Activity and Predictability in House Prices (with Carles Vergara-Alert), 2020, Real Estate Economics, 48(4), 1030-1073.

We show that short sales constraints of Real Estate Investment Trusts (REITs) can forecast next month's future house prices.   Presented at the 2013 AEA/AREUA meeting.

 

4) Ownership Structure, Limits to Arbitrage and Stock Returns: Evidence from  Equity Lending Markets (with Melissa Porras Prado and Jason Sturgess), 2016, Review of Financial Studies, 29(12), 3211-3244.  (Editor's Choice article)

We show how ownership structure can lead to limits to arbitrage through their impact on the equity lending market. Winner - Best Paper in Regulation, XVIII Foro de Finanzas. Presented at the 2014 AFA Meeting.

 

5) The Role of Institutional Investors in Voting: Evidence from the Securities Lending Market (with Reena Aggarwal and Jason Sturgess), 2016, Journal of Finance 70(5), 2309-2346.

We examine equity lending market data around voting record dates to measure the value of a vote and how institutions use the proxy process as an important channel for affecting corporate governance. Winner – Q Group Award. Presented at the 2012 WFA, 2012 EFA and 2013 AFA Meetings.

 

6) Price Efficiency and Short Selling (with Kari Sigurdsson), 2011, Review of Financial Studies, 24(3), 821-852. (Internet Appendix here)

This paper shows how short-sale constraints are associated with stock price inefficiency using a novel dataset with lending supply postings and borrowing transactions.

 

7) Technical Analysis: Luck or Reality?, 2003, Revista Brasileira de Economia, 57(4).

This is my MSc. dissertation, showing how technical analysis does not work once you account for data-snooping when evaluating trading strategies.


Slides

1) Short Selling: Theoretical and Empirical Impact on Financial Markets

Mini-course with a review of the short selling literature for the SBFin 2019 meeting at Rio de Janeiro, Brazil.


 

Old Papers (not sure when/if they will ever be revised)


1) Differences of Opinion, Information Asymmetry and the Timing of Trades, 2006.

This paper shows how analysts' forecast dispersion and information asymmetry affect trading volume around earnings announcements.

 

2) Expected Returns and Liquidity Risk: Does Entrepreneurial Income Matter?, 2005.

Models the joint impact of liquidity risk and non-tradable income on stock returns.

 

3) Economics and Finance  PhD. Application's Guide to Brazilian Students, 2002.

A guide to Brazilian students applying to Economics PhD programs. Old but still relevant.