In Search of Shares: Benchmarked Ownership, Short Covering, and Price Efficiency
Sanjeev Bhojraj, Yong Yu, Wuyang Zhao
Management Science · 2026
Abstract
We examine whether ownership by benchmarked investors constrains short sellers’ ability to quickly cover their positions following positive earnings news and thereby exacerbates price pressure from short covering. We find that high benchmarked ownership is related to greater price overshooting in highly shorted stocks at positive earnings announcements. This effect is driven by benchmarked ownership amplifying both price and volume impacts of short covering. Exploring shocks from Russell index reconstitutions and examining other settings such as management guidance and analyst recommendation revisions yield similar inferences. Overall, our findings highlight a novel mechanism that benchmarked ownership can constrain short-selling activities. This paper was accepted by Eric So, accounting. Funding: The authors acknowledge financial assistance from their respective schools. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.07231 .
Keywords
benchmarked ownership, short covering, earnings announcements, price pressure, short selling, short squeezes
Enable JavaScript for citation tools and additional paper interactions.