Short Sales, Margin Trades and Bid-Ask Spreads
22 Pages Posted: 2 May 2015
Date Written: 2013
Abstract
This study examines intraday patterns of short sales, margin purchases, adverse selection, and bid-ask spreads in the order-drivenmarket of the Taiwan Stock Exchange (TWSE). We find that both short sales and margin purchases exhibit a U-shaped intraday pattern in the TWSE. We further show that short sales and margin purchases have a significantly positive relationship with adverse selection and bid-ask spreads. We provide evidence that the U-shaped pattern of bid-ask spreads can be explained by short selling and margin trading activities.
Suggested Citation: Suggested Citation
Zhao, Yan and Cheng, Lee-Young and Chang, Chong-Chuo and Ni, Cih-Ying, Short Sales, Margin Trades and Bid-Ask Spreads (2013). Pacific-Basin Finance Journal, Vol. 24, 2013. Available at SSRN: https://ssrn.com/abstract=2601179
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