Short-Sales Constraints and Price Discovery: Evidence from the Hong Kong Market

Purpose The authors investigate the 2008-2009 short-sales ban in Korea, one of the most comprehensive and restrictive short-selling bans worldwide. The purpose of this paper is to examine: whether the ban stopped a destabilizing effect, if there was any, of short-selling activities; whether the ban improved or deteriorated the informational efficiency or the price discovery process of the stock market; and whether the ban had any impact on market liquidity. Design/methodology/approach Multiple regression; vector autoregression analysis; and generalized autoregressive conditional heteroskedasticity analysis. Findings The authors find no evidence that short-sales have a market-destabilizing effect and thus, restricting short-selling has a market-stabilizing effect. On the contrary, the short-selling ban is associated with an increase in return volatility and a deterioration of the price discovery process, particularly for the stocks without derivatives traded on them. The authors also find evidence of a liquidity decrease for short-sale intensive stocks. However, the evidence is inconclusive as to whether the market efficiency and liquidity changes are solely the result of the short-sales ban or the compound effects of both the ban and the concurrent progress of the financial crisis. Originality/value The literature does not provide a conclusive view on the effects of short-sales or restrictions thereof on the stock market. Also, the existing research on recent worldwide shorting bans often lack empirical scope (e.g. 32 stocks for UK; three weeks for USA). In contrast, the short-sales ban in the Korean stock market, one of the most comprehensive and restrictive short-selling bans worldwide, lasted for eight months for all the listed stocks and is still in effect for financial stocks. The authors find no evidence that short-sales have a market-destabilizing effect and thus, restricting short-selling has a market-stabilizing effect.

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IPO price discovery efficiency under alternative regulatory constraints: Taiwan, Hong Kong and the U.S.

International Review of Economics & Finance ◽

10.1016/j.iref.2013.05.001 ◽

2014 ◽

Vol 29 ◽

pp. 83-96 ◽

Cited By ~ 10

Author(s):

Hsiu-Hua Chang ◽

Anlin Chen ◽

Lanfeng Kao ◽

Chin-Shun Wu

Keyword(s):

Hong Kong ◽

Price Discovery ◽

Regulatory Constraints ◽

The U.S

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Does the Capital Market Opening Improve the Price Discovery Efficiency of Stock Market? An Empirical Research Based on Shanghai-Hong Kong Stock Connect

Mathematical Problems in Engineering ◽

10.1155/2021/5658597 ◽

2021 ◽

Vol 2021 ◽

pp. 1-14

Author(s):

Xueyan Yu ◽

Yanbing Yu

Keyword(s):

Hong Kong ◽

Stock Market ◽

Information Content ◽

Insider Trading ◽

Capital Market ◽

Stock Price ◽

Price Discovery ◽

Price Information ◽

Market Opening ◽

Reaction Speed

Whether capital market opening improves the price discovery efficiency of stock market is an important issue. Shanghai-Hong Kong Stock Connect (hereafter, SHKSC) is a milestone event in the opening up of China’s capital market. Based on SHKSC, using the method of PSM + DID, we study the impact of capital market opening on the price discovery efficiency from two dimensions-stock price information content and price reaction speed to information. Our research shows that capital market opening did not increase stock price information content, but speed up the reaction of price to information. Therefore, capital market opening improves capital market’s price discovery efficiency in terms of response speed of stock price to information. Further analysis shows that capital market opening affects stock price reaction speed through improving market information environment and reducing insider trading, but it has not yet had a substantial impact on listed companies’ earnings quality, which is the main participant in the capital market, and therefore has failed to influence the stock price information content. In order to maximize the effectiveness of capital market opening, it is necessary to introduce more effective policies to improve the information disclosure quality of listed firms and reduce the level of insider trading.

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Restrictions on Allocation Discretion: Evidence from Clawbacks in Hong Kong IPOs

Quarterly Journal of Finance ◽

10.1142/s2010139213500183 ◽

2013 ◽

Vol 03 (03n04) ◽

pp. 1350018 ◽

Cited By ~ 1

Author(s):

Emmanuel Morales-Camargo

Keyword(s):

Hong Kong ◽

Institutional Investors ◽

Price Discovery ◽

Distribution Functions ◽

Investment Banks ◽

Individual Investors ◽

Investment Bankers ◽

Retail Investors ◽

Just Price ◽

Public Offer

The presence of both restricted and unrestricted, US-style, bookbuilt initial public offer (IPOs) in Hong Kong provides an ideal environment to test numerous underpricing models by simultaneously measuring the effects of allocation restrictions on the investment bankers' price discovery, underwriting, and distribution functions. While clawbacks, a set of allocation restrictions favoring retail investors not participating in the roadshow result in diminished and more expensive price discovery, they also reduce the investment bankers' dependence on institutional investors to dispose off IPO shares, resulting in lower underpricing. This favors models that highlight the importance of the underwriting function on underpricing, and shows that allocation restrictions can impact more than just price discovery. In addition, this study shows that individual investors can partially offset the loss of roadshow information caused by clawbacks, countering the idea that investment banks are unable to extract any pricing information from investors outside their list of roadshow regulars.

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