Short-Selling Risk in Australia
Posted: 9 Mar 2021
Date Written: April 16, 2020
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: Suggested Citation