IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v56y2020i14p3445-3467.html
   My bibliography  Save this article

Short-selling Activity and Return Predictability: Evidence from the Chinese Stock Market

Author

Listed:
  • Lanlan Liu
  • Dan Luo
  • Ningru Zhao

Abstract

We examine the informativeness of short selling in the Chinese stock market based on monthly and daily short-interest data from January 2011 to July 2018. We find that short selling negatively predicts future stock returns in China. The pattern is robust when controlling for firm size, book-to-market ratio, and liquidity. A long-short strategy using a short-interest ratio (SIR)—shares shorted to shares outstanding—generates a 0.865% monthly return. We also document that return predictability is stronger when short selling is restricted. Meanwhile, we examine the information content of short-selling activity, and we confirm that the significant negative relationship between preannouncement short activity and post-announcement period returns.

Suggested Citation

  • Lanlan Liu & Dan Luo & Ningru Zhao, 2020. "Short-selling Activity and Return Predictability: Evidence from the Chinese Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(14), pages 3445-3467, November.
  • Handle: RePEc:mes:emfitr:v:56:y:2020:i:14:p:3445-3467
    DOI: 10.1080/1540496X.2019.1694895
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2019.1694895
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/1540496X.2019.1694895?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fan, Yi & Gao, Yang, 2024. "Short selling, informational efficiency, and extreme stock price adjustment," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1009-1028.
    2. Lu, Pu & Wang, Yong & Li, Bing, 2024. "Short selling and corporate financial fraud: Empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1569-1582.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:56:y:2020:i:14:p:3445-3467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.