Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142803
Authors: 
Jank, Stephan
Roling, Christoph
Smajlbegovic, Esad
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 25/2016
Abstract: 
This paper analyzes how newly introduced transparency requirements for short positions affect investors' behavior and security prices. Employing a unique data set, which contains both public positions above and confidential positions below the regulatory disclosure threshold, we offer several novel insights. Positions accumulate just below the threshold, indicating that a sizable fraction of short sellers are reluctant to disclose their positions publicly. Furthermore, we provide evidence that the transparency measures effectively represent a short-sale constraint for secretive investors, which results in stocks to be overpriced. Specifically, when this constraint is potentially binding, stocks subsequently exhibit a negative abnormal return of 1.0-1.4% on a monthly basis. Different placebo tests verify that the short-sale constraint originates from the disclosure threshold. Overall, these findings suggest that short sellers' evasive behavior in response to the transparency regulation imposes a negative externality on stock market efficiency.
Subjects: 
short selling
transparency
investor behavior
stock market efficiency
JEL: 
G14
G15
G23
ISBN: 
978-3-95729-276-6
Document Type: 
Working Paper

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