Short sales in the NYSE batch open and NASDAQ opening cross
Purpose - The purpose of this paper is to study short sales trading as part of the New York Stock Exchange (NYSE) batch open and National Association of Securities Dealers Automated Quotations (NASDAQ) opening cross. The paper examines whether short transactions at the open can predict future returns. Design/methodology/approach - The study tests to see if short transactions in the NYSE opening batch trade and NASDAQ opening cross are informative of future returns. Findings - It is found that a stock's opening-trade short volume is predictive of its short volume for the rest of trading day, positively related to its previous-day price change, and positively related to its overnight price change at the opening trade on option-expiration Fridays when the stock is part of the Standard and Poor (S and P) 500 index. Originality/value - While previous research shows that intraday short sale trades are informative, this is the first paper to examine the opening trade of the day, and whether these short sales are informative.
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Volume (Year): 8 (2012)
Issue (Month): 3 (June)
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References listed on IDEAS
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- Stephen E. Christophe & Michael G. Ferri & James J. Angel, 2004. "Short-Selling Prior to Earnings Announcements," Journal of Finance, American Finance Association, vol. 59(4), pages 1845-1876, 08.
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- 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.
- Stoll, Hans R & Whaley, Robert E, 1990. "Program Trading and Individual Stock Returns: Ingredients of the Triple-Witching Brew," The Journal of Business, University of Chicago Press, vol. 63(1), pages 165-192, January.
- Raymond M. Brooks & Ajay Patel & Tie Su, 2003. "How the Equity Market Responds to Unanticipated Events," The Journal of Business, University of Chicago Press, vol. 76(1), pages 109-134, January.
- Karl B. Diether & Kuan-Hui Lee & Ingrid M. Werner, 2009. "Short-Sale Strategies and Return Predictability," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 575-607, February.
- Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-658.
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