Toward understanding short-selling activity: demand and supply

Adrian W.K. Cheung; Hung Wan Kot; Eric F.Y. Lam; Harry K.M. Leung

doi:10.1111/acfi.12430

Toward understanding short-selling activity: demand and supply

Adrian W.K. Cheung, Hung Wan Kot, Eric F.Y. Lam, Harry K.M. Leung

Research output: Contribution to journal › Article › peer-review

Abstract

We investigate the demand and supply sides of short-selling activity in the US from 2003 to 2015. We construct four types of demand-side variables from fundamentals, and three types of supply-side variables from institutional ownership (IO) and stock loan data. The supply-side variables play a more important role in determining short selling than the demand-side variables. The IO of quasi-indexer type is the most important supply-side variable, while the arbitrage and hedging with options market is the most important demand-side variable. Finally, a portfolio sorting approach confirms the same results.

Original language	English
Pages (from-to)	2203-2230
Number of pages	28
Journal	Accounting and Finance
Volume	60
Issue number	3
DOIs	https://doi.org/10.1111/acfi.12430
Publication status	Published - 1 Sept 2020
Externally published	Yes

Keywords

Borrowing cost
Demand and supply
Institutional ownership
Short selling

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10.1111/acfi.12430

Cite this

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title = "Toward understanding short-selling activity: demand and supply",

abstract = "We investigate the demand and supply sides of short-selling activity in the US from 2003 to 2015. We construct four types of demand-side variables from fundamentals, and three types of supply-side variables from institutional ownership (IO) and stock loan data. The supply-side variables play a more important role in determining short selling than the demand-side variables. The IO of quasi-indexer type is the most important supply-side variable, while the arbitrage and hedging with options market is the most important demand-side variable. Finally, a portfolio sorting approach confirms the same results.",

keywords = "Borrowing cost, Demand and supply, Institutional ownership, Short selling",

author = "Cheung, {Adrian W.K.} and Kot, {Hung Wan} and Lam, {Eric F.Y.} and Leung, {Harry K.M.}",

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N2 - We investigate the demand and supply sides of short-selling activity in the US from 2003 to 2015. We construct four types of demand-side variables from fundamentals, and three types of supply-side variables from institutional ownership (IO) and stock loan data. The supply-side variables play a more important role in determining short selling than the demand-side variables. The IO of quasi-indexer type is the most important supply-side variable, while the arbitrage and hedging with options market is the most important demand-side variable. Finally, a portfolio sorting approach confirms the same results.

AB - We investigate the demand and supply sides of short-selling activity in the US from 2003 to 2015. We construct four types of demand-side variables from fundamentals, and three types of supply-side variables from institutional ownership (IO) and stock loan data. The supply-side variables play a more important role in determining short selling than the demand-side variables. The IO of quasi-indexer type is the most important supply-side variable, while the arbitrage and hedging with options market is the most important demand-side variable. Finally, a portfolio sorting approach confirms the same results.

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KW - Demand and supply

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ER -

Toward understanding short-selling activity: demand and supply

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Keywords

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