Keywords

short sale restrictions, informed trading, price impact

Abstract

We use the 2008 short selling regulations to test whether short sale restrictions can increase informed short selling. For the preborrow requirement, we find more negative price reactions to short interest announcements though no reliable increase in the price impact of short sales volume. For the stocks with banned short sales, we find an increase in the price impact of short sale volume though no reliable change in the price reaction to short interest announcements. Both restrictions, however, are associated with increased informed trading. Our results suggest that short restrictions will not reduce informed short selling and may actually result in an increase by increasing the proportion of informed short sellers.

Original Publication Citation

“Can Short Restrictions Actually Increase Informed Short Selling?” Financial Management (2013) 42: 155-181 (with Adam Kolasinski and Adam Reed).

Document Type

Peer-Reviewed Article

Publication Date

2013

Publisher

Financial Management

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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Accounting Commons

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