Short selling around the 52-week and historical highs

Although the distance of a stock price to its past price high does not provide fundamental-related information, it plays an important role of anchoring investors׳ expectations about the performance of stocks. Using a stock׳s 52-week and historical highs, we examine the impact of the nearness to these price highs on short sellers' trading behavior in the U.S. equity market from 1988 to 2012. We find that short selling is negatively associated with the nearness of the price to the 52-week high, while it is positively associated with the nearness to the historical high. This suggests that short sellers exploit other investors' behavioral biases.