Shorting at close range: A tale of two types

Comerton-Forde, C; Jones, CM; Putniņš, TJ

Shorting at close range: A tale of two types

Comerton-Forde, C Jones, CM Putniņš, TJ

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Publication Type:: Journal Article
Citation:: Journal of Financial Economics, 2016, 121 (3), pp. 546 - 568
Issue Date:: 2016-09-01

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Field	Value	Language
dc.contributor.author	Comerton-Forde, C	en_US
dc.contributor.author	Jones, CM	en_US
dc.contributor.author	Putniņš, TJ https://orcid.org/0000-0001-5731-499X	en_US
dc.date.available	2020-10-01T19:01:24Z
dc.date.issued	2016-09-01	en_US
dc.identifier.citation	Journal of Financial Economics, 2016, 121 (3), pp. 546 - 568	en_US
dc.identifier.issn	0304-405X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/41411
dc.description.abstract	© 2016 We examine returns, order flow, and market conditions in the minutes before, during, and after NYSE and Nasdaq short sales. We find two distinct types of short sales: those that provide liquidity, and those that demand it. Liquidity-supplying shorts are strongly contrarian at intraday horizons. They trade when spreads are unusually wide, facing greater adverse selection. Liquidity-demanding shorts trade when spreads are narrow and tend to follow short-term price declines. These results support a competitive rational expectations model where both market-makers and informed traders short, indicating that these two shorting types are integral to both price discovery and liquidity provision.	en_US
dc.relation.ispartof	Journal of Financial Economics	en_US
dc.relation.isbasedon	10.1016/j.jfineco.2016.05.002	en_US
dc.rights	info:eu-repo/semantics/openAccess
dc.subject.classification	Finance	en_US
dc.title	Shorting at close range: A tale of two types	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	121	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1606 Political Science	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access	*
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	121	en_US

Abstract:

© 2016 We examine returns, order flow, and market conditions in the minutes before, during, and after NYSE and Nasdaq short sales. We find two distinct types of short sales: those that provide liquidity, and those that demand it. Liquidity-supplying shorts are strongly contrarian at intraday horizons. They trade when spreads are unusually wide, facing greater adverse selection. Liquidity-demanding shorts trade when spreads are narrow and tend to follow short-term price declines. These results support a competitive rational expectations model where both market-makers and informed traders short, indicating that these two shorting types are integral to both price discovery and liquidity provision.

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http://hdl.handle.net/10453/41411