Identifying short candidates: a review of stock-selection criteria in speculative short-selling studies

Abstract

Academic studies on speculative short selling employ a wide range of stock-selection criteria, yet these criteria are dispersed across different strands of literature and have not been systematically reviewed as a unified object of analysis. The purpose of the study is to identify the stock-selection criteria used in speculative short-selling research, group them into coherent categories, and determine which representative indicators recur most frequently. Using a structured literature review, the study classifies the reviewed criteria according to their primary informational source and compares their distribution across the literature. The analysis distinguishes five broad groups of criteria: fundamental, technical, sentiment-based, market microstructure, and industry- or sector-level. Fundamental and technical criteria remain the most prominent groups, while market microstructure variables also form an important component of speculative short-selection research, especially in studies relying on short-selling activity, lending conditions, and event-related evidence. Sentiment-based and industry-level criteria appear less frequently, but they contribute to more specialized and more recent research, including ESG controversies, social-media sentiment, and sector-level return dynamics. Overall, the review shows that speculative short-stock selection is more structured than it may initially appear and can be understood through a relatively stable set of recurring criteria categories and indicators.