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Short sales and the weekend effect—Evidence from a natural experiment

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  • Gao, Pengjie
  • Hao, Jia
  • Kalcheva, Ivalina
  • Ma, Tongshu

Abstract

Price pressure induced by the short-seller׳s systematic unwinding and rewinding short positions around the weekend allegedly contributes to the weekend effect. On the Hong Kong Stock Exchange, short-selling was prohibited before 1994 and was allowed only for some stocks after 1994. Exploiting this natural experiment, we find a strong weekend effect during the pre-1994 period and during the post-1994 period for both stocks that are allowed to be sold short and those that are not. Moreover, the difference in the weekend effects between the two groups is economically and statistically indistinguishable. These results are inconsistent with the above-mentioned hypothesis.

Suggested Citation

  • Gao, Pengjie & Hao, Jia & Kalcheva, Ivalina & Ma, Tongshu, 2015. "Short sales and the weekend effect—Evidence from a natural experiment," Journal of Financial Markets, Elsevier, vol. 26(C), pages 85-102.
    • Handle: RePEc:eee:finmar:v:26:y:2015:i:c:p:85-102
    DOI: 10.1016/j.finmar.2015.06.005
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    References listed on IDEAS

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    Cited by:

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    3. Zhang, Yan & Ikeda, Shin S., 2016. "A dynamic panel analysis of HKEx shorting ban’s impact on the relationship between disagreement and future returns," Finance Research Letters, Elsevier, vol. 17(C), pages 10-16.
    4. Ülkü, Numan & Rogers, Madeline, 2018. "Who drives the Monday effect?," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 46-65.
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    7. Gould, John & Yang, Joey W. & Singh, Ranjodh & Yeo, Ben, 2023. "The seasonality of lottery-like stock returns," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 383-400.

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    More about this item

    Keywords

    Short sale; Weekend effect; Hong Kong Stock Exchange;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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