Informed Short Selling in Cross-Listed Stocks

25 Pages Posted: 15 Jan 2019

See all articles by Shan Li

Shan Li

Xiamen University - Institute for Financial and Accounting Studies

George Mihaylov

University of Adelaide

Yessy A. Peranginangin

Monash University - Monash University Malaysia

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Date Written: January 12, 2019

Abstract

We examine if differences in short selling volumes and the information impounded by short sells can contribute to explaining pricing differences which exist between the A- and H-share markets in China. In particular, we argue and also find that informed short selling around earnings announcements occurs primarily on the H-share market, which then leads to differences in the post-announcement drift of cross-listed stocks in the A- and H-share markets. In addition, we also show these informed trades are, at least partly, driven by private signals that are likely to relate to firms which are more opaque and further away from a major financial exchange. Our findings have direct implications for explaining the A- and H-share pricing discrepancy by showing a potential channel through which negative news is asymmetrically impounded into H-share prices.

Keywords: Short selling, earnings announcements, cross-listing, A-shares and H-shares, informed trading

JEL Classification: G11, G14, G15, G34

Suggested Citation

Li, Shan and Mihaylov, George and Peranginangin, Yessy A. and Zurbruegg, Ralf, Informed Short Selling in Cross-Listed Stocks (January 12, 2019). 2019 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=3315792 or http://dx.doi.org/10.2139/ssrn.3315792

Shan Li (Contact Author)

Xiamen University - Institute for Financial and Accounting Studies ( email )

Xiamen, Fujian 361005
China

George Mihaylov

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide, SA 5005
Australia
+61 8 8313 2056 (Phone)

HOME PAGE: http://www.adelaide.edu.au/directory/george.mihaylov

Yessy A. Peranginangin

Monash University - Monash University Malaysia ( email )

Malaysia

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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