Bullish/bearish/neutral strategies under short sale restrictions

Kwangil Bae, Jangkoo Kang and Soonhee Lee

Journal of Banking & Finance, 2016, vol. 71, issue C, 227-239

Abstract: This study investigates the effects of short sale restrictions by extending the model of Dridi and Germain (2004) and infers informed traders’ strategies and the relation between order imbalance and price thereunder. The results are generally in line with the empirical evidence documented in the literature and are summarized as follows: First, seller-initiated trading incurs a greater price reaction. Second, short sale restrictions shift the skewness of asset returns. Third, the restrictions can stimulate investors to acquire information or increase each individual trader's order flow under the bullish and neutral signals as well as the bearish signal, which is yet to be explored empirically.

Keywords: Short sale; Directional trading; Efficiency; Skewness (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:71:y:2016:i:c:p:227-239

DOI: 10.1016/j.jbankfin.2016.07.005

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