CONTAINS SPOILERS

To complete this quest, you must first talk to people around your village. Eventually a young girl provides clues to where the Shade is. Go to where the pigs are, next to the river. Next, you'll be asked to check the area in front of the library. Lastly, the girl says the Shade is definitely not near the northern gate or the west hill. Go to the hill (see image) to the west and kill the Shade.