TITLE:
Does Short Selling Increase Speculation? Evidence from the Chinese Stock Market
AUTHORS:
Lixu Xie, Xindong Zhang, Yan Zhang, Dong Wang
KEYWORDS:
Short Selling, Speculation, Investor Structure, DID Model
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.7,
October
24,
2019
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.