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A synthesized model of short selling constraints and their impact on stock returns

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  • Jose Gutierrez

    (Sam Houston State University)

  • Steve Johnson

    (Sam Houston State University)

  • Robert Stretcher

    (Sam Houston State University)

Abstract

This paper presents a synthesized model explaining the returns of short-sale constrained stocks. We combine short-sale constraints that were previously treated individually or in pairs into a more fully specified model. The model is also specified in generally falling versus generally rising markets, and in consideration of relative effects for large/mid-cap versus small/micro-cap firms. There is evidence that a more fully specified model provides additional insight with less factor omission bias than prior models. Beyond that, our results indicate asymmetric pricing differences between least versus most short-sale constrained stocks, sensitive to overall market direction.

Suggested Citation

  • Jose Gutierrez & Steve Johnson & Robert Stretcher, 2018. "A synthesized model of short selling constraints and their impact on stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(1), pages 191-210, January.
    • Handle: RePEc:spr:jecfin:v:42:y:2018:i:1:d:10.1007_s12197-017-9393-y
    DOI: 10.1007/s12197-017-9393-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Short-sell constraints; Asymmetry; Relative short interest; Institutional ownership; Options; Dividends;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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