Bullish/bearish/neutral strategies under short sale restrictions |
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| Institution: | 1. College of Business Administration, Chonnam National University, Gwangju, South Korea;2. College of Business, Korea Advanced Institute of Science and Technology, Seoul, South Korea;3. Korea Exchange, Busan, South Korea;1. HEC Montréal, 3000 Chemin de la Côte-Sainte-Catherine, Montréal Québec H3T 2A7, Canada;2. Université de Sherbrooke, 2500 Boulevard de l''Université, Sherbrooke Québec J1K 2R1, Canada |
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| Abstract: | This study investigates the effects of short sale restrictions by extending the model of Dridi and Germain (2004) and infers informed traders’ strategies and the relation between order imbalance and price thereunder. The results are generally in line with the empirical evidence documented in the literature and are summarized as follows: First, seller-initiated trading incurs a greater price reaction. Second, short sale restrictions shift the skewness of asset returns. Third, the restrictions can stimulate investors to acquire information or increase each individual trader's order flow under the bullish and neutral signals as well as the bearish signal, which is yet to be explored empirically. |
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