428_lecture6_ShortB_S09 - Short Selling and Short Interest...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
Short Selling and Short Interest (How Smart Are the Bears?) AEM 428 Manny Dong Materials from Charles Lee (2003) & Bhaskaran Swaminathan (2005)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
09/23/09 SEC’s Action on Financial Crisis On September 18, 2008, the SEC imposed a ban until Sep. 30, 2008, on short sales of hundreds of financial stocks. On Oct 1, 2008 SEC Extended ban to Oct. 17, 2008. Supporter: Prevent the market from declining Opponent: Cause market inefficiency How do you conduct a research to address the concerns? (797 banned stocks)
Background image of page 2
09/23/09 A ban on short sales of financial stocks comes at a high price. Working paper by Zhang et al. 2008 Did the ban accomplish the SEC's goals? What were the unintended consequences? Targeted firms (797) Control firms Short Reduced Price 12.5%(d0) 10.9%(d1) Spread 77bp 32bp Volatility 10.6 7.2 Ban did achieve basic goals Ban distorted markets for targeted firms, degrading the market quality of stocks and reducing liquidity.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
09/23/09 Review: Short Selling What are long sellers and short sellers in common?
Background image of page 4
09/23/09 Review: Short Selling Benefits (Seller):
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
09/23/09 Review: Short Selling Risks and restrictions (seller):
Background image of page 6
09/23/09 Review: Short Selling Benefits (Lender):
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
09/23/09 Review: Short Selling Risks and restrictions (lender):
Background image of page 8
09/23/09 Part II. Research Roundup
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
09/23/09 Research Questions Market Statistics What do we know about short-interest in aggregate? How does the market for borrowing work? How Smart are the Bears? The information content of short interest How much shorting is “normal”? Does short interest predict future returns? If so, what measures seem to work best. => Dechow et al. (2001); Desai (2002); Asquith-Meulbroek (1995): Execution Cost Issues What do we know about short trades? Frequency and execution costs. Short-horizon profitability of short sales. => Angel (2002) Is short interest information really exploitable? Are profits from Dechow et al. (2001) and Desai (2002) illusionary? The role of short-sell constraints => Boehme et al. (2002)
Background image of page 10
09/23/09 Market Statistics Where can we find information about short interest? Prime Brokers But difficult to get overall picture on every stock WSJ and Barron’s Has up-to-minute information on availability NYSE Stocks (reported around 20 th to 23 rd of each month) NASDAQ Stocks (reported around 25 th to 28 th of each month) NASDAQ Trading Data Each trade initiated by a short-seller is marked Jim Angel (FAJ, 2002) NYSE/AMEX/NASDAQ http://Shortsqueez.com Caveats: Only as of 15 of each month; reported only if more than 250,000 shares are shorted
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Market Statistics What type of information is reported? Short Positions:
Background image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 37

428_lecture6_ShortB_S09 - Short Selling and Short Interest...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online