The Information Roles of Short Sales in Chinese Stock Markets

Jiandong Li and Lin Tan

This paper investigates whether short sales have increased the market efficiency since short sales were allowed in 2010. Evidence from regression R-squared method and from Dimson beta method shows that short sales do increase the revealing of firm specific information, and individual stock prices react to their own information quicker than before. This paper also checks whether short sales contain information in the earnings announcement events. Results confirm that short sellers are able to make profit through increasing their short positions at pre-announcement period.

JEL Codes: G12, G14, G15

DOI : http://dx.doi.org/10.21102/irbrp.2016.03.121.03