Abstract

Citations (24)

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Role of Speculative Short Sales in Price Formation: Case of the Weekend Effect

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

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.

Keywords: short sellers, short sales, weekend, options, seasonality

JEL Classifications: G14

Accepted Paper Series

Date posted: May 26, 2003 ; Last revised: May 26, 2003

Suggested Citation

Chen, Honghui and Singal, Vijay, Role of Speculative Short Sales in Price Formation: Case of the Weekend Effect. Journal of Finance, Vol. 58, No. 2, April 2003. Available at SSRN: http://ssrn.com/abstract=404140

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Contact Information

Vijay Singal (Contact Author) Virginia Polytechnic Institute & State University - Pamplin College of Business ( email ) 1016 Pamplin Hall Blacksburg, VA 24061 United States 540-231-7750 (Phone) 540-231-3155 (Fax)
Honghui Chen University of Central Florida ( email ) PO Box 161400 Orlando, FL 32816 United States 407-823-0895 (Phone)

Abstract

Citations (24)

Date posted: May 26, 2003 ; Last revised: May 26, 2003

Suggested Citation

Contact Information

Vijay Singal (Contact Author)

Honghui Chen