Abstract

http://ssrn.com/abstract=1710924
 
 

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Short-Selling, Uptick Rule, and Market Quality: Evidence from High-Frequency Data on Hong Kong Stock Exchange


Pengjie Gao


University of Notre Dame - Mendoza College of Business

Jia Hao


Wayne State University - Department of Finance

Ivalina Kalcheva


University of Arizona - Department of Finance

Tongshu Ma


Binghamton University

March 1, 2011


Abstract:     
Much empirical research has been conducted concerning the effect of short-selling on market quality and volatility. However, the evidence is inconclusive and still a matter of debate. Using intraday data in a pure order-driven market we show that allowing for short-selling decreases the adverse selection costs for less-visible firms, firms with less analyst coverage, larger adverse-selection cost component of the bid-ask spread, low price per share, and high relative tick size (given the same market capitalization). Allowing for short-selling also decreases (increases) intraday volatility for less- (more-) visible stocks. In addition we document that with the uptick rule in place (not in place) there is not statistically significant difference in liquidity (intraday volatility) between stocks that are allowed for short-selling and those that are not.

Number of Pages in PDF File: 43

Keywords: short-selling, uptick rule, market quality, liquidity, volatility

JEL Classification: G1, G2

working papers series


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Date posted: November 20, 2010 ; Last revised: March 4, 2011

Suggested Citation

Gao, Pengjie and Hao, Jia and Kalcheva, Ivalina and Ma, Tongshu, Short-Selling, Uptick Rule, and Market Quality: Evidence from High-Frequency Data on Hong Kong Stock Exchange (March 1, 2011). Available at SSRN: http://ssrn.com/abstract=1710924 or http://dx.doi.org/10.2139/ssrn.1710924

Contact Information

Pengjie Gao
University of Notre Dame - Mendoza College of Business ( email )
246 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-8048 (Phone)
Jia Hao
Wayne State University - Department of Finance ( email )
Prentis 313, 5201 Cass Ave.
Detroit, MI 48202
United States
313-577-5059 (Phone)
Ivalina Kalcheva (Contact Author)
University of Arizona - Department of Finance ( email )
Finance Department
P.O.Box 210108
Tucson, AZ 85721
United States
HOME PAGE: http://finance.eller.arizona.edu/faculty/ikalcheva.asp
Tongshu Ma
Binghamton University ( email )
PO Box 6001
Binghamton, NY 13902-6000
United States
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