The costs and benefits of short sale disclosure

Truong X. Duong, Zsuzsa R. Huszár and Takeshi Yamada ()

Journal of Banking & Finance, 2015, vol. 53, issue C, 124-139

Abstract: In this study, we examine the impact of a market-wide mandatory disclosure policy on short selling on the Tokyo Stock Exchange. We find that average short selling slightly declined while investors’ shorting strategies changed significantly in response to the disclosure. Previously highly shorted stocks were shorted less and shorting activity shifted toward smaller and riskier stocks, suggesting that retail investors became the more likely short sellers. Short sales became more trend-chasing, prices became less informative, and short-term price volatility increased. Overall, the pricing efficiency benefits of short selling declined after the mandatory disclosure policy.

Keywords: Institutional traders; Market efficiency; Pricing efficiency; Short selling (search for similar items in EconPapers)
JEL-codes: G1 G12 G14 (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:jbfina:v:53:y:2015:i:c:p:124-139

DOI: 10.1016/j.jbankfin.2014.12.014

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