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Paper Stats:
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Role of Speculative Short Sales in Price Formation: Case of the Weekend Effect
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HONGHUI CHEN
University of Central Florida
VIJAY SINGAL
Virginia Polytechnic Institute & State University - Pamplin College of Business
Journal of Finance, Vol. 58, No. 2, April 2003
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Abstract:
We argue that short sellers affect prices in a significant and systematic manner. In particular, we contend that speculative short sales contribute to the weekend effect: the inability to trade over the weekend is likely to cause these short sellers to close their speculative positions on Fridays and reestablish new short positions on Mondays causing stock prices to rise on Fridays and fall on Mondays. We find evidence in support of this hypothesis based on a comparison of high short-interest stocks and low short-interest stocks, stocks with and without actively traded options, IPOs, zero short-interest stocks, and highly volatile stocks.
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Keywords: short sellers, short sales, weekend, options, seasonality
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JEL Classifications: G14
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Accepted Paper Series
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Contact Information for
VIJAY
SINGAL
(Contact Author)
Email address for VIJAY
SINGAL
Virginia Polytechnic Institute & State University - Pamplin College of Business
1016 Pamplin Hall
Blacksburg
, VA
24061
United States
540-231-7750 (Phone)
540-231-3155 (Fax)
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Contact Information for
HONGHUI
CHEN
Email address for HONGHUI
CHEN
University of Central Florida
PO Box 161400
Orlando
, FL
32816
United States
407-823-0895 (Phone)
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