BOSTON — Harvard Business School assistant professors Lauren H. Cohen and Christopher J. Malloy, both members of the School's Finance Unit, have recently won the 2007 Smith Breeden Prize, which recognizes the top three papers published in The Journal of Finance in any area other than corporate finance. Their paper, Supply and Demand Shifts in the Shorting Market (coauthored with Karl B. Diether of the Fisher College of Business at Ohio State University) examines the link between the shorting market and stock prices.
"We find that shorting demand is an important predictor of future stock gains," they write. "An increase in shorting demand leads to negative abnormal returns of 2.98% in the following month. We also show that our results are stronger in environments with less public information flow, suggesting that the shorting market is an important mechanism for private information revelation."
Cohen joined the Harvard Business School faculty in 2007. After receiving bachelor's degrees from both the University of Pennsylvania and the Wharton School in 2001, he earned a Ph.D. in Finance from the University of Chicago Graduate School of Business in 2005. Malloy graduated from Yale College in 1996 before earning an MBA and a Ph.D in Finance, also at the University of Chicago Graduate School of Business. Both Cohen and Malloy teach in Harvard's required first-year MBA course in Finance.
Previous HBS recipients of the Smith Breeden Prize include Joshua D. Coval, Paul A. Gompers, Eli Ofek, David S. Scharfstein, Erik Stafford, and Peter Tufano.