Stock price manipulation, short-sale constraints, and breadth-return relationship

Cao, Zhiqi; Lv, Dayong; Sun, Zhenzhen

doi:10.1016/j.pacfin.2021.101556

Cited by 6 publications

(5 citation statements)

References 60 publications

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“…They observed that short sales constraints significantly delayed the assimilation of information into stock prices, and such restrictions demonstrated notable return predictability. Cao et al (2021) contended that short-sales constraints prompted manipulative behavior among large investors. Empirical evidence presented by Cao et al (2021) suggested a substantial reduction in stock price manipulation after the relaxation of short sales constraints.…”

Section: Cost Of Borrowing Stocks Short-sale Constraints and Stock Re...mentioning

confidence: 99%

“…Cao et al (2021) contended that short-sales constraints prompted manipulative behavior among large investors. Empirical evidence presented by Cao et al (2021) suggested a substantial reduction in stock price manipulation after the relaxation of short sales constraints.…”

Section: Cost Of Borrowing Stocks Short-sale Constraints and Stock Re...mentioning

confidence: 99%

Section: Review Of Empirical Studies Providing Evidence On the Influe...mentioning

confidence: 99%

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Short-sale constraints and stock returns: a systematic review

Khan

2024

JCMS

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PurposeThis study delves into the nuanced implications of short-sale constraints on stock prices within the context of stock market efficiency. While existing research has explored this relationship, inconsistencies persist in their findings. The purpose of this study is to conduct a comprehensive review of literature to elucidate the reasons behind these disparities.Design/methodology/approachA systematic review of existing theoretical and empirical studies was conducted following the PRISMA method. The analysis centered on discerning the factors contributing to the divergence in projected stock prices due to these constraints. Key areas explored included assumptions related to expectations homogeneity, revisions, information uncertainty, trading motivations and fluctuations in supply and demand of risky assets.FindingsThe review uncovered multifaceted reasons for the disparities in findings regarding the influence of short-sale constraints on stock prices. Variations in assumptions related to market expectations, coupled with fluctuations in perceived information uncertainty and trading motivations, were identified as pivotal factors contributing to differing projections. Empirical evidence disparities stemmed from the use of proxies for short-sale constraints, varied sample periods, market structure nuances, regulatory changes and the presence of option trading.Originality/valueThis study emphasizes the significance of not oversimplifying the impact of short-sale constraints on stock prices. It highlights the need to understand these effects within the broader context of market structure and methodological considerations. By delineating the intricate interplay of factors affecting stock prices under short-sale constraints, this review provides a nuanced perspective, contributing to a more comprehensive understanding in the field.

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Section: Cost Of Borrowing Stocks Short-sale Constraints and Stock Re...mentioning

confidence: 99%

Section: Cost Of Borrowing Stocks Short-sale Constraints and Stock Re...mentioning

confidence: 99%

Section: Review Of Empirical Studies Providing Evidence On the Influe...mentioning

confidence: 99%

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Short-sale constraints and stock returns: a systematic review

Khan

2024

JCMS

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“…We use firm‐specific measures to capture a firm's external information environment. At the firm level, financial analysts and institutional investors, as important participants in the capital market, play essential roles in information collection and dissemination (Cao, Feng, et al, 2021a; Cao, Lv, & Sun, 2021; Chen et al, 2021; Li et al, 2021; Liang et al, 2021). Accordingly, analyst coverage and the presence of institutional shareholders enhance a firm's information environment by providing more firm‐specific information and thus are expected to influence the role of Guba messages in reducing stock price synchronicity.…”

Section: Guba Messages and Stock Price Synchronicity: Possible Mechan...mentioning

confidence: 99%

Messages in online stock forums and stock price synchronicity: Evidence from China

Huang

Cao

et al. 2022

Accounting & Finance

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Online stock forums allow investors to share information and exchange opinions, which facilitates the incorporation of firm‐specific information into prices and reduces stock price synchronicity. However, prior research presents mixed evidence as to the value of messages in online forums. Using the information of the Eastmoney Guba online forum in China, we find a causal and negative relation between Guba messages and stock price synchronicity. The finding is robust after accounting for media reports and firm fixed effects and using both an instrumental variable analysis and an experimental design that exploits exogenous changes in the authenticity of Guba messages. We find the impact of Guba information is attributed to its roles in both information dissemination and investor interaction and is more pronounced for messages with a negative narrative tone. Additional tests suggest Guba messages improve firm information disclosure quality, reduce stock price crash risk and decrease stock return volatility synchronicity.

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“…Investors buying stocks with overbought phenomena (i.e., buying stocks at rising prices due to investors' optimistic sentiment likely triggered by further rising higher prices expected) may suffer losses; similarly, investors selling stocks with oversold phenomena (i.e., selling stocks at falling prices due to investors' pessimistic sentiment likely expecting further falling share prices) may suffer losses ( Al Janabi et al., 2019 ). Furthermore, stakeholders and even insiders may profit from such phenomena by selling at an overestimated price or buying at an underestimated price ( Cao et al., 2021 ; Clarke, 2022 ; Xiao et al., 2022 ).…”

Section: Introductionmentioning

confidence: 99%