Title : Effects of Short-sale Constraints on Stock Prices and Trading Activity: Evidence from Hong Kong and Mainland China
We examine the effect of short-sale constraints based on a natural setting in Mainland China and Hong Kong. While the A-shares traded in Mainland China are all ineligible for short-sale, some H-shares traded in Hong Kong are eligible for short-sale but some are not. We therefore investigate the effect of short-sale eligibility for H-shares on the A-H share premiums. When the market goes down, the prices of shortable H-shares decrease more than those of non-shortable H-shares, resulting in a larger A-H share premium for shortable H-shares. Furthermore, when the market goes down, the H-share volume (relative to the A-share volume) is higher for shortable stocks than for non-shortable stocks. This suggests that short-selling eligibility allows more investors to trade (including bearish investors).
Keywords: Short-sale constraints, overvaluation, trading activity, Hong Kong market, China A-share market
Classification: G12, G15, G18
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학회소식
[2010년 제 4차] Effects of Short-sale Constraints on Stock Prices a
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2010-12-09