Short selling efficiency (SSE), measured each month by the slope coefficient of cross-sectionally regressing abnormal short interest on a mispricing score, significantly and negatively predicts stock market returns both in-sample and out-of-sample, suggesting that mispricing gets corrected after short sales are executed on the right stocks. We show conceptually and empirically that SSE has favorable predictive ability over aggregate short interest, as SSE reduces the effect of noises in short interest and better captures the amount of aggregate short selling capital devoted to overpricing. The predictive power is stronger during the periods of recession, high volatility, and low public information. In addition, low SSE precedes the months when the CAPM performs well and signals an efficient market. Overall, our evidence highlights the importance of the disposition of short sales in stock markets.

卖空效率 (SSE)，每月通过对错误定价分数的异常卖空兴趣的横截面回归的斜率系数来衡量，显着和负面地预测样本内和样本外的股票市场回报，表明错误定价得到了纠正在对正确的股票进行卖空后。我们从概念上和经验上表明，SSE 对总空头兴趣具有良好的预测能力，因为 SSE 减少了空头兴趣噪声的影响，并更好地捕捉到用于定价过高的总卖空资金量。在经济衰退、高波动性和低公共信息期间，预测能力更强。此外，在 CAPM 表现良好并标志着有效市场的月份之前，SSE 较低。全面的，