J. Edward Graham

Does High Short Interest Lead Underperformance

A popular opinion among investors is that a heavily shorted stock is a prime candidate for an upward move since short-sellers will ultimately unwind their positions and purchase the stock. The authors find the reverse; high short interest on the Nasdaq leads underperformance. They believe investors are not fully using published short sales data in their investment choices and that confusion exists over the use of the data. They suggest that investors who intentionally ignore short-selling data may do so at some peril.

Hurricane risk and coastal property owner choices

Purpose – The purpose of this paper is to contrast the behavior of a US homeowner exposed to hurricane risk with government policies designed to limit hurricane losses. Owners limit these losses by selecting structural improvements or mitigation and wind and flood insurance.Design/methodology/approach – The paper uses mitigation costs, hurricane probabilities, and insurance premiums to frame rational cost‐minimizing choices for the homeowner.Findings – First, even though nationwide hurricane damage costs are large, the cost‐minimizing response for an individual property owner may be to buy no mitigation or structural improvements, no flood insurance and minimal wind insurance, as probabilities of strong hurricanes striking particular locations are extremely low. Second, additional insurance is a less costly defense than structural improvement, even under much higher insurance premiums and hurricane strike probabilities. Third, federally subsidized flood insurance may reduce the effectiveness of government...