Abstract

http://ssrn.com/abstract=1572356
 
 

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Failures to Deliver, Short Sale Constraints, and Stock Overvaluation


Don M. Autore


Florida State University - College of Business

Thomas Jason Boulton


Miami University

Marcus V. Braga-Alves


Marquette University

January 28, 2011

AFA 2012 Chicago Meetings Paper

Abstract:     
Studying a large sample of publicly available data on failures to deliver, we find that stocks reaching threshold levels of failures become significantly overvalued. Where short sale constraints are especially binding, we report extreme overpricing and subsequent reversals. These findings support the overvaluation hypothesis, although the mispricing is likely to be difficult to arbitrage because of extreme shorting costs. Moreover, threshold stocks with low short interest become more overvalued than threshold stocks with high short interest. This suggests that the level of short interest reflects supply-side effects when the examination conditions on the difficulty of borrowing shares.

Number of Pages in PDF File: 28

Keywords: Failures to deliver, short interest, institutional ownership, short sale constraints, stock returns

JEL Classification: D02, G14, G28

working papers series


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Date posted: March 17, 2010 ; Last revised: November 19, 2011

Suggested Citation

Autore, Don M. and Boulton, Thomas Jason and Braga-Alves, Marcus V., Failures to Deliver, Short Sale Constraints, and Stock Overvaluation (January 28, 2011). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1572356 or http://dx.doi.org/10.2139/ssrn.1572356

Contact Information

Don M. Autore
Florida State University - College of Business ( email )
821 ACADEMIC WAY, Room 314 RBA
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
850-644-7857 (Phone)
Thomas Jason Boulton (Contact Author)
Miami University ( email )
Oxford, OH 45056
United States
(513) 529-1563 (Phone)
(513) 529-8598 (Fax)
Marcus V. Braga-Alves
Marquette University ( email )
P.O. Box 1881
Milwaukee, WI 53201-1881
United States
(414) 288-5721 (Phone)
(414) 288-5756 (Fax)
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