Successive short‐selling ban lifts and gradual price efficiency: evidence from China

Xiong Xiong, Ya Gao and Xu Feng

Accounting and Finance, 2017, vol. 57, issue 5, 1557-1604

Abstract: Using a database of five successive short‐selling ban lifts in the Chinese stock market, we find that the stock price efficiency gradually changes. Specifically, the price efficiency of stocks that can be shorted later improves more than the price efficiency of stocks that can be shorted earlier. Two hypotheses are tested to explain the gradual changed price efficiency: the private information hypothesis and the analysis capability hypothesis. We further show that short selling is more associated with private information than with public information and that the relationship grows stronger after each ban lift, which supports the private information hypothesis.

Date: 2017
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