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- Title
SHORT SELLING AND PRICE DISCOVERY: EVIDENCE FROM AMERICAN DEPOSITARY RECEIPTS.
- Authors
Brockman, Paul; Hao, (Grace) Qing
- Abstract
The underlying shares of some American Depositary Receipts (ADRs) can be short sold in their home markets, and others cannot. This institutional feature offers a unique opportunity to investigate the relation between short selling and price discovery. We hypothesize and confirm that ADR short selling on a U.S. exchange is more informative when the ADRs' underlying shares cannot be short sold in the home market. These and related results suggest that short sellers make a significant contribution to price discovery. Short sellers' trading activity, representing more than 20% of total ADR share volume, increases the benefits of cross-listing on U.S. exchanges.
- Subjects
UNITED States; SHORT selling (Securities); HEDGING (Finance); FUTURES; SECURITIES; SPREAD (Finance); SECURITIES trading; MARGIN accounts
- Publication
Journal of Financial Research, 2011, Vol 34, Issue 4, p569
- ISSN
0270-2592
- Publication type
Article
- DOI
10.1111/j.1475-6803.2011.01302.x