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Short-Selling Risk

Journal of Finance, Forthcoming

UNC Kenan-Flagler Research Paper No. 2312625

47 Pages Posted: 20 Aug 2013 Last revised: 10 Nov 2017

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

Adam V. Reed

University of North Carolina Kenan-Flagler Business School

Matthew Ringgenberg

University of Utah - Department of Finance

Date Written: January 21, 2017

Abstract

Short sellers face unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that short-selling risk affects prices among the cross-section of stocks. Stocks with more short-selling risk have lower returns, less price efficiency, and less short selling.

Keywords: short selling-risk, equity lending, market efficiency, limits to arbitrage, short sale

JEL Classification: G12, G14

Suggested Citation

Engelberg, Joseph and Reed, Adam V. and Ringgenberg, Matthew, Short-Selling Risk (January 21, 2017). Journal of Finance, Forthcoming; UNC Kenan-Flagler Research Paper No. 2312625. Available at SSRN: https://ssrn.com/abstract=2312625 or http://dx.doi.org/10.2139/ssrn.2312625

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Adam V. Reed

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Matthew C. Ringgenberg (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

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