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Short-selling activities in the time of COVID-19

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  • Luu, Ellie
  • Xu, Fangming
  • Zheng, Liyi

Abstract

This study examines the daily short-selling activities in the U.S. market during the early 2020 outbreak of the COVID-19 global pandemic. Our findings indicate firms that are more sensitive to the shock (i.e., with high foreign exposure, low financial or operating flexibility, or high supply-chain exposure) were shorted more heavily. Moreover, short-selling activities during the COVID-19 pandemic, blamed for triggering stock market crashes, were primarily concentrated around overpriced stocks. This finding supports the argument that short selling plays a prominent role in improving price discoveries. Our research provides timely empirical evidence supporting the U.S. Securities and Exchange Commission's (SEC) non-intervention approach in banning short selling in the U.S. market.

Suggested Citation

  • Luu, Ellie & Xu, Fangming & Zheng, Liyi, 2023. "Short-selling activities in the time of COVID-19," The British Accounting Review, Elsevier, vol. 55(4).
    • Handle: RePEc:eee:bracre:v:55:y:2023:i:4:s0890838923000549
    DOI: 10.1016/j.bar.2023.101216
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    More about this item

    Keywords

    Short selling; COVID-19 pandemic; Mispricing; Price discovery;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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