Short-selling activities in the time of COVID-19 |
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Affiliation: | 1. Strathclyde Business School, University of Strathclyde, UK;2. University of Bristol Business School, University of Bristol, Howard House, Queen''s Avenue, Bristol, BS8 1SD, UK |
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Abstract: | This study examines the daily short-selling activities in the U.S. market during the early 2020 outbreak of the COVID-19 global pandemic. Our findings indicate firms that are more sensitive to the shock (i.e., with high foreign exposure, low financial or operating flexibility, or high supply-chain exposure) were shorted more heavily. Moreover, short-selling activities during the COVID-19 pandemic, blamed for triggering stock market crashes, were primarily concentrated around overpriced stocks. This finding supports the argument that short selling plays a prominent role in improving price discoveries. Our research provides timely empirical evidence supporting the U.S. Securities and Exchange Commission's (SEC) non-intervention approach in banning short selling in the U.S. market. |
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Keywords: | Short selling COVID-19 pandemic Mispricing Price discovery G14 G10 G18 |
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