Do Short Sellers Discipline Analysts? Evidence from a Quasi-Natural Experiment

Ke, Yun; Lo, Kin; Sheng, Jinfei; Zhang, Jenny Li

doi:10.2139/ssrn.2537553

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2017

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“…These firms are more likely to attract short sellers since their short‐selling cost is lower (Hirshleifer et al ). Before Regulation SHO, short selling was limited because of the price tests and short‐selling costs (Ke et al ). Removal of these tests reduced the constraints and short‐selling costs and led to more short sales for those firms, thereby improving their informativeness (relative to non‐pilot firms).…”

Section: Resultsmentioning

confidence: 99%

Does High Stock Return Synchronicity Indicate High or Low Price Informativeness? Evidence from a Regulatory Experiment

Kan

Gong

2017

Int Rev Finance

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We investigate the link between stock return synchronicity and price informativeness by exploiting the Regulation SHO pilot program, which removed short-selling price tests for randomly selected stocks ("pilot stocks") in May 2005. A difference-in-differences analysis reveals that relative to non-pilot stocks, pilot stocks saw a significantly larger increase in both price informativeness and return synchronicity when the pilot program started, but such difference disappeared when Regulation SHO removed the short-selling price tests for all stocks in July 2007. The results suggest that high return synchronicity reflects high, rather than low price informativeness.

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Section: Resultsmentioning

confidence: 99%