Short Selling and the Weekend Effect in Nasdaq Stock Returns

27 Pages Posted: 20 Jan 2009

See all articles by Stephen E. Christophe

Stephen E. Christophe

George Mason University - Department of Finance

Michael G. Ferri

George Mason University

James Angel

Georgetown University - Department of Finance

Abstract

We examine daily short selling of Nasdaq stocks to explore whether speculative short selling causes a significant portion of the weekend effect in returns. We identify a weekend effect in speculative short selling whereby it constitutes a larger percentage of trading volume on Mondays versus Fridays. We find an opposite effect in dealer short selling, consistent with market makers adding liquidity and stability. Our main finding is that speculative short selling does not explain an economically meaningful portion of the weekend effect in returns, even among the firms most that are most actively shorted. This finding contradicts some prior studies.

Suggested Citation

Christophe, Stephen and Ferri, Michael G. and Angel, James J., Short Selling and the Weekend Effect in Nasdaq Stock Returns. Financial Review, Vol. 44, Issue 1, pp. 31-57, February 2009. Available at SSRN: https://ssrn.com/abstract=1330179 or http://dx.doi.org/10.1111/j.1540-6288.2008.00209.x

Stephen Christophe (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States
703-993-1767 (Phone)
703-993-1870 (Fax)

Michael G. Ferri

George Mason University ( email )

School of Management
4400 University Drive
Fairfax, VA 22030
United States
703-993-1858 (Phone)

James J. Angel

Georgetown University - Department of Finance ( email )

McDonough School of Business
Washington, DC 20057
United States
202-687-3765 (Phone)
202-687-4031 (Fax)

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