skip to navigation skip to content



Grant for finance paper

Research paper by Dr Pedro Saffi of Cambridge Judge Business School on short selling and hedge fund activism is awarded a 10,000 euro grant by the Inquire Europe organisation.

Dr Pedro Saffi
Dr Pedro Saffi

A research paper on the effect of short selling on hedge fund activism by Dr Pedro Saffi, Reader in Financial Economics at Cambridge Judge Business School, has received a 10,000 euro award from Inquire Europe, a non-profit organisation that brings together professionals to find solutions to investment problems. The grant goes directly to the researcher.

The paper’s preliminary findings show that firms involving large short sellers are more likely to be targeted by hedge fund activists, and those campaigns are more likely to succeed when there are large short-selling positions on the stock. However, successful campaigns only generate abnormal long-run profits in the absence of large short sellers in targeted firms – suggesting that the amount of short-selling activity should be considered by investors when considering an activist campaign and estimating its profitability.

Short sellers believe that shares in certain firms are overvalued, so they seek to generate profits by selling securities they do not own or have borrowed in hopes of buying them back later at a lower price. Hedge funds are sophisticated investors who can build up large positions and who seek to drive firms’ policies in order to increase value.

Research on the paper by Dr Pedro Saffi – entitled “Hedge Fund Activism and Big Bears: The Impact of Large Short Positions Disclosures” – is enabled by a 2012 European Union requirement that short positions exceeding 0.5 per cent of outstanding shares must be disclosed to the public.