Short-Selling Risk in Australia

Posted: 9 Mar 2021

See all articles by Tze Chuan 'Chewie' Ang

Tze Chuan 'Chewie' Ang

Deakin University - Department of Finance; Financial Research Network (FIRN)

Aziz Hayat

Deakin University

Bob Li

Deakin University - Deakin Business School

Date Written: April 16, 2020

Abstract

We confirm the negative relation between short-selling risk and stock returns in the US. We estimate a measure of dynamic short-selling risk in Australia and find a similar negative relation in Australia. The negative relation is more pronounced amongst small Australian stocks, but is absent in large Australian stocks. Australian stocks have lower equity loan supply and short interest, but higher equity loan fees and longer loan length than US stocks. The higher variation in equity loan utilization rate and loan characteristics in Australian stocks possibly contribute to their higher short-selling risk compared to their US counterparts.

Keywords: Short-selling risk, Equity lending, Return predictability

JEL Classification: G12, G14

Suggested Citation

Ang, Tze Chuan and Hayat, Aziz and Li, Bob, Short-Selling Risk in Australia (April 16, 2020). Pacific-Basin Finance Journal, Vol. 63, 2020, Available at SSRN: https://ssrn.com/abstract=3769814

Tze Chuan Ang (Contact Author)

Deakin University - Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia
+61 3 9244 6626 (Phone)

HOME PAGE: http://www.deakin.edu.au/profiles/tze-ang

Financial Research Network (FIRN)

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

HOME PAGE: http://www.firn.org.au

Aziz Hayat

Deakin University ( email )

75 Pigdons Road
Victoria, 3216
Australia

Bob Li

Deakin University - Deakin Business School ( email )

Australia

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