Does Short Selling Increase Speculation? Evidence from the Chinese Stock Market - Theoretical Economics Letters

TEL > Vol.9 No.7, October 2019

Does Short Selling Increase Speculation? Evidence from the Chinese Stock Market ()

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Download as PDF (Size: 360KB) PP. 2699-2710

DOI: 10.4236/tel.2019.97169 560 Downloads 1,320 Views

Author(s)

Lixu Xie^1,2,3, Xindong Zhang¹, Yan Zhang¹, Dong Wang⁴

Affiliation(s)

¹School of Economics and Management, Shanxi University, Taiyuan, China.
²School of Management Science and Engineering, Anhui University of Technology, Maanshan, China.
³Corporate Governance and Operational Center, Anhui University of Technology, Maanshan, China.
⁴School of Mathematics and Physics, Anhui University of Technology, Maanshan, China.

ABSTRACT

Using difference-in-differences method, this paper examines the effect of the introduction of short selling in the Chinese stock market on the speculative trading of underlying stocks and makes a further exploration of the cause from the perspective of the changes in shareholder structure. It is found that speculative trading of underlying stocks is significantly decreased after short selling is introduced, and the speculation of stocks with low market value and low idiosyncratic volatility is increased more than those with high market value and high idiosyncratic volatility. Leaving the short selling markets of some small and institutional investors, who prefer to speculative trading, are able to partially and well explain these study results.

KEYWORDS

Short Selling, Speculation, Investor Structure, DID Model

Share and Cite:

Xie, L. , Zhang, X. , Zhang, Y. and Wang, D. (2019) Does Short Selling Increase Speculation? Evidence from the Chinese Stock Market. Theoretical Economics Letters, 9, 2699-2710. doi: 10.4236/tel.2019.97169.

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