Return predictability of short-selling and financial distress firms: Evidence from Korean stock market

Shu-Feng Wang

Pacific-Basin Finance Journal, 2023, vol. 82, issue C

Abstract: This paper investigates the relationship between short-selling activity and one-month ahead stock returns, with a focus on the role of distressed firms in the Korean stock market. In contrast to the U.S. market, we find that short-selling activity is concentrated on firms in the investment-grade group. Consistent with prior research, we find predictability of short-selling trading in stock returns. Moreover, we find that short-selling activity has significant role in predicting stock returns for investment-grade but not for speculative-grade group in the Korean market.

Keywords: Short selling; Credit rating; Korean stock market (search for similar items in EconPapers)
JEL-codes: G18 G23 G28 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x2300269x

DOI: 10.1016/j.pacfin.2023.102198

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