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Short-sale constraints and stock price informativeness

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  • Ebrahimnejad, Ali
  • Hoseinzade, Saeid

Abstract

Morck, Yeung, and Yu (2000), in their pioneering study of international differences in stock price synchronicity, emphasize the effect of market development on investors' ability to incorporate firm-specific information into prices. We use a unique institutional feature in the Hong Kong market to investigate one of the important tools investors use to do this and hence reduce stock price synchronicity: short selling. Examining the cross-sectional and time-series variation in short-sale constraints in the Hong Kong market, we find that after the removal of short-sale constraints, stock prices become more informative and move less in tandem with the market.

Suggested Citation

  • Ebrahimnejad, Ali & Hoseinzade, Saeid, 2019. "Short-sale constraints and stock price informativeness," Global Finance Journal, Elsevier, vol. 40(C), pages 28-34.
    • Handle: RePEc:eee:glofin:v:40:y:2019:i:c:p:28-34
    DOI: 10.1016/j.gfj.2018.11.002
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    References listed on IDEAS

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    Cited by:

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    3. Lockwood, Jimmy & Lockwood, Larry & Miao, Hong & Ramchander, Sanjay & Yang, Dongxiao, 2022. "The information content of ETF options," Global Finance Journal, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Comovement; Short selling; Stock price informativeness;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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