Short sales, margin purchases and bid–ask spreads

Yan Zhao, Lee-Young Cheng, Chong-Chuo Chang and Cih-Ying Ni

Pacific-Basin Finance Journal, 2013, vol. 24, issue C, 199-220

Abstract: This study examines intraday patterns of short sales, margin purchases, adverse selection, and bid–ask spreads in the order-driven market of the Taiwan Stock Exchange (TWSE). We find that both short sales and margin purchases exhibit a U-shaped intraday pattern in the TWSE. We further show that short sales and margin purchases have a significantly positive relationship with adverse selection and bid–ask spreads. We provide evidence that the U-shaped pattern of bid–ask spreads can be explained by short selling and margin trading activities.

Keywords: Short sales; Margin purchases; Adverse selection; Bid–ask spreads (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:24:y:2013:i:c:p:199-220

DOI: 10.1016/j.pacfin.2013.05.001

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