Short Selling, Informational Efficiency, and Extreme Stock Price Adjustment
Using Chinese equity data from April 2009 to August 2020, we contribute to the literature by exploring the impact of short selling on stock prices in three aspects. First, we find that as short sellers become more active, stock price adjustments accelerate, and prices respond more swiftly to public information. Second, we investigate the trading behavior of short sellers during periods of extreme stock price fluctuations and reversals. Our empirical findings suggest that short sellers behave like contrarian traders during these periods and consequently, short sales reduce the deviation of extreme prices from their fundamental values. Last, we find no evidence to support the view that short sellers exacerbate stock price declines when stock prices plummet. Further analysis indicates that rational short trading activity moderates stock prices that are "inflated" due to investors’ overreaction, thereby mitigating irrationality during market fluctuations
Year of publication: |
2022
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Authors: | Fan, Yi ; Gao, Yang |
Publisher: |
[S.l.] : SSRN |
Subject: | Theorie | Theory | Börsenkurs | Share price | Leerverkauf | Short selling | Effizienzmarkthypothese | Efficient market hypothesis |
Saved in:
freely available
Extent: | 1 Online-Ressource (52 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 29, 2021 erstellt |
Other identifiers: | 10.2139/ssrn.4257374 [DOI] |
Classification: | G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014235886
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