Download This PaperShorting in Broad Daylight: Short Sales and Venue Choice
Journal of Financial and Quantitative Analysis, Forthcoming
Kenan Institute of Private Enterprise Research Paper No. 18-14
42 Pages Posted: 1 Aug 2018 Last revised: 9 Sep 2019
Date Written: September 7, 2019
Abstract
Using a novel database on venue short sales and market design characteristics, we ask: Where do short sellers exploit their information advantage? Consistent with the prediction of Zhu (2014), we find that exchange short sales comprise a larger proportion of trading and are more informative about future prices than dark pool short sales, particularly when there is greater competition among short sellers to trade and in the presence of short-lived information. When examining market design characteristics, we find that dark pools offering volume weighted average price crossing attract more short sales while those offering block trading attract fewer short sales.
Keywords: Information, market design, trading, short sales, return predictability
JEL Classification: G1, G10
Suggested Citation: Suggested Citation
Adam V. Reed (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
Mehrdad Samadi
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States