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Information and trade sizes: The case of short sales

  • Blau, Benjamin M.
  • Van Ness, Bonnie F.
  • Van Ness, Robert A.

In this study, we examine short selling of NASDAQ stocks and observe that more information about future returns is contained in small short sales than in medium-sized and large short sales, thus supporting the idea that NASDAQ short sellers stealth trade. These results are robust to different subsamples of stocks with and without tradable options and stocks that are more likely to face binding borrowing constraints. Further, these findings are contrary to the results in Boehmer, Jones, and Zhang (2008) who find that large NYSE short sales contain the most information. Combined, our study supports the idea that NASDAQ's bid test is less restricting than the NYSE's uptick rule and therefore attenuates the likelihood of stealth trading (Diether, Lee, & Werner, 2009a).

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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 49 (2009)
Issue (Month): 4 (November)
Pages: 1371-1388

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Handle: RePEc:eee:quaeco:v:49:y:2009:i:4:p:1371-1388
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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