Short sales are almost instantaneously bad news

Evidence from the Australian stock exchange

Michael J. Aitken, Alex Frino, Michael S. Mccorry, Peter L. Swan

Research output: Contribution to journalArticle

144 Citations (Scopus)

Abstract

This paper investigates the market reaction to short sales on an intraday basis in a market setting where short sales are transparent immediately following execution. We find a mean reassessment of stock value following short sales of up to -0.20 percent with adverse information impounded within fifteen minutes or twenty trades. Short sales executed near the end of the financial year and those related to arbitrage and hedging activities are associated with a smaller price reaction; trades near information events precipitate larger price reactions. The evidence is generally weaker for short sales executed using limit orders relative to market orders.

Original languageEnglish
Pages (from-to)2205-2223
Number of pages19
JournalJournal of Finance
Volume53
Issue number6
Publication statusPublished - Dec 1998
Externally publishedYes

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