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Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market
Chang,Eric C.1; Luo,Yan2; Ren,Jinjuan3
2014-11-01
Source PublicationJournal of Banking and Finance
ISSN03784266
Volume48Pages:411-424
Abstract

China launched a pilot scheme in March 2010 to lift the ban on short-selling and margin-trading for stocks on a designated list. We find that stocks experience negative returns when added to the list. After the ban is lifted, price efficiency increases while stock return volatility decreases. Panel data regressions reveal that intensified short-selling activities are associated with improved price efficiency. Short-sellers trade to eliminate overpricing by selling stocks with higher contemporaneous returns following a downward trend, and their trades predict future returns. In contrast, we find intensified margin-trading activities for stocks with lower contemporaneous returns, and these trades have no return predictive power.

KeywordEfficiency Margin Trading Short Selling Stabilization
DOI10.1016/j.jbankfin.2013.10.002
URLView the original
Indexed BySSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance ; Economics
WOS IDWOS:000345201300031
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Cited Times [WOS]:66   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionDEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorRen,Jinjuan
Affiliation1.Faculty of Business and Economics, The University of Hong Kong,,Hong Kong
2.School of Management, Fudan University,,Shanghai,200433,China
3.Faculty of Business Administration, University of Macau,,Taipa,Macao
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Chang,Eric C.,Luo,Yan,Ren,Jinjuan. Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market[J]. Journal of Banking and Finance,2014,48:411-424.
APA Chang,Eric C.,Luo,Yan,&Ren,Jinjuan.(2014).Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market.Journal of Banking and Finance,48,411-424.
MLA Chang,Eric C.,et al."Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market".Journal of Banking and Finance 48(2014):411-424.
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