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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)

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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Bibliographic 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
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:jfinan:v:53:y:1998:i:6:p:2205-2223

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Cited by:
  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.
  2. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2007. "Are Short-sellers Different?," MPRA Paper 13585, University Library of Munich, Germany, revised 16 Nov 2008.
  3. Schouten, Michael C., 2009. "The Case for Mandatory Ownership Disclosure," MPRA Paper 14139, University Library of Munich, Germany, revised 27 Apr 2009.
  4. Matthias Blonski & Ulf von Lilienfeld-Toal, 2008. "Excess Returns and the Distinguished Player Paradox," cege – Center for European, Governance and Economic Development Research Discussion Papers 78, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany)., revised 27 Oct 2008.
  5. Benjamin Blau & Matthew Hill & Hao Wang, 2011. "REIT Short Sales and Return Predictability," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 481-503, May.
  6. Louis Gagnon & Jonathan Witmer, 2009. "Short Changed? The Market's Reaction to the Short Sale Ban of 2008," Working Papers 09-23, Bank of Canada.
  7. 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.
  8. Owen Lamont, 2004. "Go Down Fighting: Short Sellers vs. Firms," NBER Working Papers 10659, National Bureau of Economic Research, Inc.
  9. 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.
  10. Fellner, Gerlinde & Theissen, Erik, 2011. "Short sale constraints, divergence of opinion and asset value: Evidence from the laboratory," CFR Working Papers 11-03, University of Cologne, Centre for Financial Research (CFR).

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