IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Short-sale constraints and stock returns

  • Jones, Charles M.
  • Lamont, Owen A.

Stocks can be overpriced when short sale constraints bind. We study the costs of short selling equities, 1926-1933, using the publicly observable market for borrowing stock. Some stocks are sometimes expensive to short, and it appears that stocks enter the borrowing market when shorting demand is high. We find that stocks that are expensive to short or which enter the borrowing market have high valuations and low subsequent returns, consistent with the overpricing hypothesis. Size-adjusted returns are one to two percent lower per month for new entrants, and despite high costs it is profitable to short them.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6VBX-473MBMS-4/2/3f6ca9c243886d4d32cb1784a032fbb5
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 66 (2002)
Issue (Month): 2-3 ()
Pages: 207-239

as
in new window

Handle: RePEc:eee:jfinec:v:66:y:2002:i:2-3:p:207-239
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-68, September.
  2. Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers 1725, Harvard - Institute of Economic Research.
  3. Sorin M. Sorescu, 2000. "The Effect of Options on Stock Prices: 1973 to 1995," Journal of Finance, American Finance Association, vol. 55(1), pages 487-514, 02.
  4. Owen A. Lamont & Richard H. Thaler, . "Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs," CRSP working papers 528, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  5. Duffie, Darrell, 1996. " Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
  6. Liu, Jun & Longstaff, Francis A, 2000. "Losing Money on Arbitrages: Optimal Dynamic Portfolio Choice in Markets with Arbitrage Opportunities," University of California at Los Angeles, Anderson Graduate School of Management qt48k8f97f, Anderson Graduate School of Management, UCLA.
  7. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  8. James L. Davis & Eugene F. Fama & Kenneth R. French, . "Characteristics, Covariances, and Average Returns: 1929 to 1997," CRSP working papers 359, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  9. Michael J. Aitken & Alex Frino & Michael S. McCorry & Peter L. Swan, 1998. "Short Sales Are Almost Instantaneously Bad News: Evidence from the Australian Stock Exchange," Journal of Finance, American Finance Association, vol. 53(6), pages 2205-2223, December.
  10. Figlewski, Stephen, 1981. "The Informational Effects of Restrictions on Short Sales: Some Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(04), pages 463-476, November.
  11. Figlewski, Stephen & Webb, Gwendolyn P, 1993. " Options, Short Sales, and Market Completeness," Journal of Finance, American Finance Association, vol. 48(2), pages 761-77, June.
  12. Dechow, Patricia M. & Hutton, Amy P. & Meulbroek, Lisa & Sloan, Richard G., 2001. "Short-sellers, fundamental analysis, and stock returns," Journal of Financial Economics, Elsevier, vol. 61(1), pages 77-106, July.
  13. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
  14. Geczy, Christopher C. & Musto, David K. & Reed, Adam V., 2002. "Stocks are special too: an analysis of the equity lending market," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 241-269.
  15. Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:66:y:2002:i:2-3:p:207-239. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.