Trade-Size and Price Clustering: The Case of Short Sales

42 Pages Posted: 30 Oct 2008

See all articles by Benjamin M. Blau

Benjamin M. Blau

Utah State University - Huntsman School of Business

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Date Written: October 29, 2008

Abstract

Short sellers are informed (Diamond and Verrecchia, 1987, Aitken et al., 1998, and Diether, Lee, and Werner, 2007) and the information contained in short sales is driven by larger short-sale sizes (Boehmer, Jones, and Zhang, 2008). We examine whether short sales cluster on round prices and round trade sizes. Our findings show that short sellers prefer round sizes and round prices less than non-short traders, which provides evidence that short sellers are less concerned with negotiation costs, cognitive processing costs, and the costs of revealing information to the market. Further, we find evidence suggesting that size and price rounding decisions are not correlated on the NYSE and are negatively correlated for our Nasdaq sample. Unrounded short-sales are more informed than rounded short sales and large unrounded short sales are the most informed as they are able to predict the greatest negative intraday returns.

Keywords: Short Selling, Clustering, price clustering, trade size clustering

JEL Classification: G14, G19

Suggested Citation

Blau, Benjamin M. and Van Ness, Bonnie F. and Van Ness, Robert A., Trade-Size and Price Clustering: The Case of Short Sales (October 29, 2008). Available at SSRN: https://ssrn.com/abstract=1291876 or http://dx.doi.org/10.2139/ssrn.1291876

Benjamin M. Blau

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

Bonnie F. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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