Short-Sales Constraints and Price DiscoveryEvidence from the Hong Kong Market 卖空限制与价格发现：来自香港市场的证据.pdfVIP

Short-Sales Constraints and Price Discovery: Evidence from the Hong Kong Market ERIC C. CHANG, JOSEPH W. CHENG, and YINGHUI YU* ABSTRACT Short-sales practices in the Hong Kong stock market are unique in that only stocks on a list of designated securities can be sold short. By analyzing the price effects following the addition of individual stocks to the list, we find that short-sales constraints tend to cause stock overvaluation and that the overvaluation effect is more dramatic for individual stocks for which wider dispersion of investor opinions exists. These findings are consistent with Millers (1977) intuition and other optimism models. We also document higher volatility and less positive skewness of individual stock returns when short sales are allowed. - 1 -1 The question of how short sales impact capital markets is highly controversial, with short-sale 1 regulations varying widely across countries and capital markets. Although short selling has been carried out for years in major financial markets around the world, its effects on market efficiency, especially on pricing efficiency, remain of interest to financial researchers. Miller (1977) theorizes that in the presence of short-sales constraints, security prices tend to reflect a more optimistic valuation than the average opinion of potential investors and thus tend to be upward biased. This overvaluation argument is based on two conditions: (1) A security ’s short sales are either prohibited or costly, and (2) investors have heterogeneous beliefs or information about the security ’s value. The underlying i