Publicizing Arbitrage: Impact of Mandatory Disclosures

80 Pages Posted: 7 May 2012 Last revised: 1 Nov 2019

See all articles by Bige Kahraman

Bige Kahraman

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2019

Abstract

How does greater public disclosure of arbitrage activity and informed trading affect price efficiency? To answer this, we exploit rule amendments in U.S. securities markets, which impose a higher frequency of public disclosure of short positions. Higher public disclosure can hurt the production of information and deteriorate efficiency, or it can be beneficial by mitigating the limits to arbitrage and diffusing arbitrageurs’information faster. With more frequent disclosure, information encapsulated within short interest is incorporated into prices faster, improving price efficiency. We find important reductions in short-sellers’ horizon risk and increases in short-sales with the rule amendments.

Keywords: Public Disclosure; Price Efficiency; Arbitrage; Short sales

JEL Classification: G12, G14

Suggested Citation

Kahraman, Bige, Publicizing Arbitrage: Impact of Mandatory Disclosures (October 2019). Saïd Business School WP 2016-25, Available at SSRN: https://ssrn.com/abstract=2052890 or http://dx.doi.org/10.2139/ssrn.2052890

Bige Kahraman (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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