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Short Sales and the Weekend Effect - Evidence from a Natural ExperimentPengjie GaoUniversity of Notre Dame - Mendoza College of Business Jia HaoWayne State University - Department of Finance Ivalina KalchevaUniversity of Arizona - Department of Finance Tongshu MaBinghamton University July 10, 2012 Journal of Financial Markets, Forthcoming Abstract: Price pressure induced by the short-seller's systematic unwinding and rewinding short positions around the weekend allegedly contributes to the weekend effect. On the Hong Kong Stock Exchange, short-selling was prohibited before 1994 and was allowed only for some stocks after 1994. Exploiting this natural experiment, we find a strong weekend effect during the pre-1994 period and during the post-1994 period for both stocks that are allowed to be sold short and those that are not. Moreover, the difference in the weekend effects between the two groups is economically and statistically indistinguishable. These results are inconsistent with the above-mentioned hypothesis.
Number of Pages in PDF File: 35 Keywords: Short sale; Weekend effect; Hong Kong Stock Exchange JEL Classification: G14, G15 Accepted Paper SeriesDate posted: October 9, 2006 ; Last revised: July 11, 2012Suggested CitationContact Information
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