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Short Sales Are Almost Instantaneously Bad News: Evidence from the Australian Stock Exchange

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Author Info
Michael J. Aitken (University of Sydney,)
Alex Frino (University of Sydney,)
Michael S. McCorry (University of Sydney,)
Peter L. Swan (Barclays Global Investors and the University of Sydney)

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Abstract

This paper investigates the market reaction to short sales on an intraday basis in a market setting where short sales are transparent immediately following execution. We find a mean reassessment of stock value following short sales of up to - 0.20 percent with adverse information impounded within fifteen minutes or twenty trades. Short sales executed near the end of the financial year and those related to arbitrage and hedging activities are associated with a smaller price reaction; trades near information events precipitate larger price reactions. The evidence is generally weaker for short sales executed using limit orders relative to market orders. Copyright The American Finance Association 1998.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 53 (1998)
Issue (Month): 6 (December)
Pages: 2205-2223
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Handle: RePEc:bla:jfinan:v:53:y:1998:i:6:p:2205-2223

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  1. Paul D. McNelis & Carrie K.C. Chan, 2004. "Deflationary Dynamics in Hong Kong: Evidence from Linear and Neural Network Regime Switching Models," Working Papers 212004, Hong Kong Institute for Monetary Research. [Downloadable!]
  2. Michael McKenzie & Olan T. Henry, 2007. "The Determinnts of Short Selling in the Hong Kong Equities Market," Department of Economics - Working Papers Series 1001, The University of Melbourne. [Downloadable!]
  3. Owen Lamont, 2004. "Go Down Fighting: Short Sellers vs. Firms," NBER Working Papers 10659, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Olan T. Henry & Michael McKenzie, 2004. "The Impact of Short Selling on the Price-Volume Relationship: Evidence from Hong Kong," Working Papers 032004, Hong Kong Institute for Monetary Research. [Downloadable!]
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  5. Gerlinde Fellner & Erik Theissen, 2006. "Short Sale Constraints, Divergence of Opinion and Asset Values: Evidence from the Laboratory," Labsi Experimental Economics Laboratory University of Siena 009, University of Siena. [Downloadable!]
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