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Short‐sellers at home and abroad: Their respective roles in the price discovery of cross‐listed firms

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  • Jun Chen
  • Alireza Tourani‐Rad
  • Ju Xiang
  • Ting Yang

Abstract

We examine the respective role of short selling in both the home and the host market in the price discovery of mainland Chinese firms cross‐listed in Hong Kong. We find that short‐sellers of A‐shares in mainland China contribute significantly more to the price discovery than short‐sellers of corresponding H‐shares in Hong Kong, and the latter group benefits from the presence of the former group but not the other way around. Short‐sellers in mainland China promptly react to the arrival of negative news, while short‐sellers in Hong Kong do not react to such news, and tend to follow their counterparts in mainland China. We posit that the institutional differences in short selling between the two markets possibly explain the findings.

Suggested Citation

  • Jun Chen & Alireza Tourani‐Rad & Ju Xiang & Ting Yang, 2021. "Short‐sellers at home and abroad: Their respective roles in the price discovery of cross‐listed firms," International Review of Finance, International Review of Finance Ltd., vol. 21(3), pages 1013-1038, September.
    • Handle: RePEc:bla:irvfin:v:21:y:2021:i:3:p:1013-1038
    DOI: 10.1111/irfi.12317
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    References listed on IDEAS

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