56 Pages Posted: 1 Oct 2016
Date Written: September 30, 2016
What is the impact of higher publicity in the shorting market on informational efficiency? To answer this, we exploit amendments to rules in the U.S. markets which increased the frequency of public dissemination of short-sales from once-a-month to twice-a-month. Theoretically, higher publicity can improve or deteriorate informational efficiency. We find that, with more frequent disclosure, short-sellers’ information is incorporated into prices faster, improving informational efficiency. Efficiency gains are pronounced for stocks with negative information and poor informational environments. Consistent with our main findings, we document important market reactions to short-sales announcements, and reductions in short-sellers’ horizon risk and holding periods.
Keywords: Shorting Market; Disclosure; Informational Efficiency
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