Abstract

http://ssrn.com/abstract=2312625
 
 

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Short Selling Risk


Joseph Engelberg


University of California, San Diego (UCSD) - Rady School of Management

Adam V. Reed


University of North Carolina Kenan-Flagler Business School

Matthew Ringgenberg


Washington University in Saint Louis - Olin Business School

October 22, 2013

Western Finance Association (WFA), 2014
Washington University in Saint Louis Olin Business School Working Paper No. 13/004
UNC Kenan-Flagler Research Paper No. 2312625

Abstract:     
Short sellers face a number of unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that these short selling risks affect prices among the cross-section of stocks. Stocks with more short selling risk have lower returns, less price efficiency, and less short selling. Overall, short selling risk adds to the limits of arbitrage and may help explain the low short-interest puzzle (Lamont and Stein (2004)) and the short interest return anomaly (Boehmer, Huszar and Jordan (2009)).

Number of Pages in PDF File: 50

Keywords: short selling risk, equity lending, market efficiency, limits to arbitrage, over-the-counter markets, short sale

JEL Classification: G12, G14

working papers series


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Date posted: August 20, 2013 ; Last revised: May 5, 2014

Suggested Citation

Engelberg, Joseph and Reed, Adam V. and Ringgenberg, Matthew, Short Selling Risk (October 22, 2013). Western Finance Association (WFA), 2014; UNC Kenan-Flagler Research Paper No. 2312625. Available at SSRN: http://ssrn.com/abstract=2312625 or http://dx.doi.org/10.2139/ssrn.2312625

Contact Information

Joseph Engelberg
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
Adam V. Reed
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Matthew C. Ringgenberg (Contact Author)
Washington University in Saint Louis - Olin Business School ( email )
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130-4899
United States
HOME PAGE: http://apps.olin.wustl.edu/faculty/Ringgenberg/
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