This study investigates the role of short sales in mitigating post-shock anomalies in stock returns within the context of China's evolving short-sales regulations. Utilizing a unique dataset of daily short-sale volumes, this research examines how short sellers influence stock price behavior...

This study examines stock borrowing costs in Japan's centralized lendable stock market, focusing on differences between 'hard-to-borrow' and 'easy-to-borrow' stocks over six months of daily data. This study employs a comprehensive methodology to examine metrics such as the short interest ratio,...

Using microdata on stock-level lending positions from German mutual funds, we show that active funds use the equity lending market to obtain information about short sale demand. Funds reduce long positions in response to these demand signals, which allows fund managers to front-run public...

Purpose This study delves into the nuanced implications of short-sale constraints on stock prices within the context of stock market efficiency. While existing research has explored this relationship, inconsistencies persist in their findings. The purpose of this study is to conduct a...

This study investigates the effect of short sales on firms' use of trade credit. Using a sample of 3262 Chinese listed firms from 2007 to 2019, the analysis results show that both the deregulation and the magnitude of short sales negatively affect trade credit. The transmission mechanism...

Previous studies show that individual investors play a dominant role in China's stock market. Their behavior of chasing-rise being stronger than killing-fall leads to asymmetry of feedback trading. Our article investigates how mutual funds react to this market force. Using China's stock and fund...

Emerging stock markets are dominated with overconfident individual investors and in those markets short-sale constraints are frequently used to promote market stability. The unique market participants and regulations may influence the formation of stock prices and potentially lead to stock...

This study examines how short-sale constraints affect investors’ information acquisition and thereby shape stock price efficiency. By exploiting two settings that relax short-sale constraints in the US and China, respectively, we find that the removal of short-sale constraints increases...

I study how hedge funds strategically disclose their private information during short-selling campaigns. Using data on hedge funds' voluntary announcements and daily short positions in the EU market, I document the existence of two groups of funds: Announcers and Followers. Announcers, typically...

The gambler’s fallacy is the incorrect notion that after observing a particular (random) event more frequently than normal, that event is less likely to occur in the future. The main objective of our analysis is to provide tests of the gambler’s fallacy in financial markets by examining...

We empirically investigate how short selling affects product market performance via a managerial monitoring channel. Using both historical data and the Reg SHO, we find that higher short interest leads to lower market shares of large firms. Our Reg SHO results are also stronger in concentrated...

This study examines the impact of short selling on corporate financial fraud by utilizing China's relaxation of short selling regulation as a quasi-natural experiment. The results suggest that short selling can restrain the tendency of companies to commit financial fraud and reduce the severity...

Using aggregated facility-level toxic release data, we estimate the relation of pollution and short interest in the US between 1987 and 2017. Our findings suggest that short interest is significantly higher in polluting firms’ stocks, and that this relation is not an artifact of economic...

We examine the impact of shareholder litigation on short selling ahead of PIPEs. We find that PIPE issuers that incurred securities class action lawsuits prior to the PIPE are shorted more heavily ahead of the PIPE issue. The case status at the PIPE date, the severity of the lawsuit, and the...

Regulating short selling is difficult and controversial. We review the academic literature on short selling regulation and provide insights for future policymakers and academics. We organize the complex history of short selling regulation into three areas: disclosure requirements, securities...

Informed investors have been shown to break up their larger trades into smaller trades in order to disguise their information. This study considers informed trading strategies when investors face borrowing constraints. Borrowing constraints may induce more intense trading and increase the use of...

Directional bets by short sellers typically forecast future returns, but direct evidence of how other investors acquire information from these bets is nearly nonexistent. Using granular data on the entire Brazilian OTC security lending market and all trades in the Brazilian stock exchange, we...

We study events in which activist hedge funds and short sellers target the same stock using unique European data on activism and mandatory disclosures of large short positions. The presence of large short sellers is associated with a 22.6% increase in the probability of becoming an activist...

Brokers have access to order-flow data, which they can use to enhance the returns they earn from short selling. However, brokers also have a fiduciary duty to place their clients’ interests before their own. We test whether brokers exploit their informational advantage and earn larger returns...

The extant literature concludes that binding short-sale constraints restrict negative information revelation because short sellers cannot trade to the full extent to reveal their information. However, it largely ignores information conveyed by informative sales. In contrast, our model predicts...

We examine whether short sellers pay attention to textual information in annual reports in their shorting activities. We find that the presence of more weak modal words in annual reports is associated with greater shorting volume. Shorting volume directly driven by specificity terms and weak...

We exploit quasi-exogenous variation in passive ownership around the Russell 1000/2000 cutoff to explore the causal effects of passive ownership on the securities lending market. We find that passive ownership causes an increase in lendable supply and short interest, while lending fees remain...

This paper examines the effect of short-sale constraints on the pricing discrepancies between stocks and bonds of the same firms. Using data from 2006 to 2018, we find that short-sale constraints have a positive impact on pricing discrepancies. This relationship holds for both stock and bond...