Short Selling Around Seasoned Equity Offerings
AbstractWe use daily short-selling data to examine whether short selling around seasoned equity offerings (SEOs) reflects informed or manipulative trading. Around SEO announcements, we find no evidence of informed short selling. Around issue dates, higher levels of pre-issue short selling are significantly related to larger issue discounts for non-shelf-registered offerings. This evidence is consistent with manipulative trading. We show that SEC Rule 105 constrains some but not all manipulative trading. Our results reverse previous research that uses monthly short-interest data, because daily data allow more powerful tests. Our evidence helps explain the increased popularity of shelf registrations. Although short selling usually enhances price efficiency, we document a situation where short selling reduces price efficiency. The Author 2010. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal Review of Financial Studies.
Volume (Year): 23 (2010)
Issue (Month): 12 (December)
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- Ethan Watson & Mary C. Funck, 2012. "A cloudy day in the market: short selling behavioural bias or trading strategy," International Journal of Managerial Finance, Emerald Group Publishing, vol. 8(3), pages 238-255.
- Chemmanur, Thomas J. & He, Shan & Hu, Gang, 2009. "The role of institutional investors in seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 94(3), pages 384-411, December.
- Delisle, R. Jared & Lee, Bong Soo & Mauck, Nathan, 2012. "The dynamic relation between short sellers, option traders, and aggregate returns," MPRA Paper 42566, University Library of Munich, Germany.
- Benjamin Blau & Tyler J. Brough, 2012. "Concentrated short-selling activity: bear raids or contrarian trading?," International Journal of Managerial Finance, Emerald Group Publishing, vol. 8(3), pages 187-203.
- Henk Berkman & Michael McKenzie & Patrick Verwijmeren, 2013. "Hole in the Wall: Informed Short Selling ahead of Private Placements," Tinbergen Institute Discussion Papers 13-153/IV/62, Tinbergen Institute.
- K. Stephen Haggard & (Grace) Qing Hao & Ying Jenny Zhang, 2012. "Are hedge funds guilty of manipulative short-selling?," Managerial Finance, Emerald Group Publishing, vol. 38(11), pages 1048-1066, November.
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