The effect of short selling and borrowing on market prices and traders’ behavior

Sébastien Duchêne (), Eric Guerci, Nobuyuki Hanaki and Charles Noussair
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Sébastien Duchêne: CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier

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Abstract: This paper studies the influence of allowing borrowing and short selling on market prices and traders' forecasts in an experimental asset market. We verify, although not statistically significantly so, that borrowing tends to increase asset overvaluation and price orecasts, while short selling tends to reduce these measures. We also show that a number of results on beliefs, traders' types, cognitive sophistication, and earnings obtained in earlier experimental studies in which borrowing and short selling are not possible, generalize to markets with borrowing and short sales.

Keywords: short sales; margin buying; experimental asset market; bubble (search for similar items in EconPapers)
Date: 2018-12-14
New Economics Papers: this item is included in nep-exp
Note: View the original document on HAL open archive server: https://hal.science/hal-01954924v1
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Related works:
Journal Article: The effect of short selling and borrowing on market prices and traders’ behavior (2019)
Working Paper: The effect of short selling and borrowing on market prices and traders’ behavior (2019)
Working Paper: The effect of short selling and borrowing on market prices and traders’ behavior (2018)
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