Short sales and the weekend effect—Evidence from a natural experiment

Pengjie Gao, Jia Hao, Ivalina Kalcheva and Tongshu Ma

Journal of Financial Markets, 2015, vol. 26, issue C, 85-102

Abstract: Price pressure induced by the short-seller׳s systematic unwinding and rewinding short positions around the weekend allegedly contributes to the weekend effect. On the Hong Kong Stock Exchange, short-selling was prohibited before 1994 and was allowed only for some stocks after 1994. Exploiting this natural experiment, we find a strong weekend effect during the pre-1994 period and during the post-1994 period for both stocks that are allowed to be sold short and those that are not. Moreover, the difference in the weekend effects between the two groups is economically and statistically indistinguishable. These results are inconsistent with the above-mentioned hypothesis.

Keywords: Short sale; Weekend effect; Hong Kong Stock Exchange (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:26:y:2015:i:c:p:85-102

DOI: 10.1016/j.finmar.2015.06.005

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