Abstract: | This study tests Karpoff's (1987) cosUy short sales hypothesis that attempts to explain the asymmetric relationship be- tween stock price changes and trading volume. Since short sales are disallowed on the Stock Exchange of Singapore, the data set offers a polar case of costly short sales. We document an asymmetric price change-volume relationship that is consistent with previous empiri- cal evidence based on US. data sets. More importantly we find a polar case of the asymmetric price change-volume relationship that supports Karpoff's (1987) costly short sales hypothesis: a positive correlation between positive price change and volume, but no signif- icant relationship between negative price change and volume. |