Short Interest, Insider Trading, and Stock Returns

31 Pages Posted: 19 Feb 2009

See all articles by Tak Yan Leung

Tak Yan Leung

City University of Hong Kong (CityU) - Department of Accountancy

Oliver M. Rui

China Europe International Business School (CEIBS); affiliation not provided to SSRN

Steven Shuye Wang

School of Business, Renmin University of China

Date Written: February 12, 2009

Abstract

We examine the effects of short selling and the combined effects of two forms of informed trading - short selling and insider trading on stock price movements in the Hong Kong stock market. Short selling in Hong Kong is characterized by a high frequency of transactions. We provide empirical evidence that short-selling transactions carry information that signals a future decrease in the share price. We also find that insider purchasing helps to mitigate the negative impact of short-selling transactions. Our regression results show that the magnitude of abnormal losses is related to the value of the short-selling transaction, the presence of insider purchasing, and whether the security being sold is also an optioned stock.

Keywords: short-selling, insider trading, information asymmetry

JEL Classification: G10, G14

Suggested Citation

Leung, Tak Yan and Rui, Oliver M. and Rui, Oliver M. and Wang, Steven Shuye, Short Interest, Insider Trading, and Stock Returns (February 12, 2009). Available at SSRN: https://ssrn.com/abstract=1341511 or http://dx.doi.org/10.2139/ssrn.1341511

Tak Yan Leung

City University of Hong Kong (CityU) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

affiliation not provided to SSRN

Steven Shuye Wang

School of Business, Renmin University of China ( email )

Beijing
China
8610-6251-8856 (Phone)

HOME PAGE: http://rbs.org.cn

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
257
Abstract Views
2,469
rank
150,225
PlumX Metrics