Short Selling and Intraday Price Pressures

Abstract

We study episodes of significant intraday downward price pressures in individual stocks and find that price declines during such episodes are driven mainly by liquidity demanding nonshort volume. Although short sellers during these price pressure episodes are also active and somewhat exacerbate the magnitude of price declines, their influence on prices is secondary to that of nonshort sellers. As such, our findings are inconsistent with the recently reignited allegations of systematic trading abuses caused solely by short sellers and might shed light on the debate regarding the need to reinstitute short selling restrictions.

Failures to Deliver, Short Sale Constraints, and Stock Overvaluation

“…Whereas our evidence suggests that naked short sellers can be exploited by predatory trading,Shkilko, Van Ness and Van Ness (2012) find that traditional short sellers often act as predator.…”

Failures to Deliver, Short Sale Constraints, and Stock Overvaluation

“…Whereas our evidence suggests that naked short sellers can be exploited by predatory trading, Shkilko, Van Ness and Van Ness () find that traditional short sellers often act as predator.…”

Predatory Short Sales and Bailouts

“…Empirically, predatory short sales appear to be a rare animal that is difficult to spot. While some market participants claim their existence 6 the literature does not provide clear positive evidence on the prevalence of manipulative short selling and its effects (e.g., Boehmer and Wu, 2013;Karpoff and Lou, 2010;Shkilko et al, 2012). The lack of empirical evidence could be due to the difficulty of distinguishing informed short sellers from uninformed ones.…”