The determinants of short selling

Evidence from the Hong Kong equity market

Michael McKenzie*, Ólan T. Henry

*Corresponding author for this work

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

While most financial regulators agree that short sellers have an important role to play in ensuring an efficiently functioning market, it is interesting to note that many did not hesitate to ban short selling during the recent financial crisis. This apparent contradiction most likely stems from a lack of understanding about what motivates short trading. In this paper, we focus on the determinants of short selling during 'normal' trading in the Hong Kong stock market. We find that dividend payments, company fundamentals, risk, option trading, the interest rate spread and past returns and short selling are all significant determinants of short selling.

Original languageEnglish
Pages (from-to)183-216
Number of pages34
JournalAccounting and Finance
Volume52
Issue numberSUPPL.1
DOIs
Publication statusPublished - Oct 2012

Keywords

  • Equities
  • Market efficiency
  • Short selling

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