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To short or not to short? Improving morality judgments of short trades and short traders

Subimal Chatterjee, M. Deniz Dalman and Satadruta Mookherjee

Journal of Business Research, 2020, vol. 114, issue C, 173-185

Abstract: Consumers often judge short trading that profit when asset prices fall to be less moral than long trading that profit when asset prices rise. In this research, we show that the relatively lower moral judgments of short trades/traders make consumers favor long instruments over short instruments as their investment vehicle of choice. However, we can make short instruments appear as attractive as long instruments by incorporating an economic argument and a moral argument for short trades, i.e., short trades make markets efficient by revealing the true worth of an asset and thereby protect consumers from higher prices. We find that neither the economic nor the moral argument, by themselves, can make short trades morally equivalent to long trades. The results imply that financial organizations need a core moral justification to validate the efficiency/rationality of their practices if they wish to respond to public pressures demanding ethical behavior.

Keywords: Moral judgments; Short/long trades; Market efficiency; Morality-efficiency tradeoff (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jbusres.2020.04.011

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