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: experimental asset market; bubble; margin buying; short sales (search for similar items in EconPapers)
Date: 2019
Note: View the original document on HAL open archive server: https://hal.science/hal-02278885v1
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Citations: View citations in EconPapers (4)

Published in Journal of Economic Dynamics and Control, 2019, 107, pp.103734. ⟨10.1016/j.jedc.2019.103734⟩

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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 (2018)
Working Paper: The effect of short selling and borrowing on market prices and traders’ behavior (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02278885

DOI: 10.1016/j.jedc.2019.103734

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