Was short selling embraced by participants in an emerging market during the COVID-19 pandemic?


Chan, Kar Hoong and Tay, Lee Ying and Ng, Tuan Hock and Ahmed, Elsadig Musa and Amran, Azlan and Tang, Kin Boon (2023) Was short selling embraced by participants in an emerging market during the COVID-19 pandemic? Asian Economic and Financial Review, 13 (10). pp. 677-686. ISSN 2305-2147

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The COVID-19 pandemic has put the financial system under considerable strain and triggered an unprecedented reaction in the financial market. To promote financial stability and strengthen the Malaysian financial market, the authorities banned regulated short selling activities in March 2020 and subsequently lifted the ban in January 2021. This study objectively examines the stock price reactions toward regulated short selling activities announcements and documents the most recent empirical study which examines the short selling related announcements in the emerging market. There are differing opinions on stock price reactions regarding short selling announcements, so to examine the stock price reactions, the event study methodology was employed. The event window for this study is -15 days, 0 (announcement day), +15 days. Interestingly, the findings showed that the stock prices responded negatively to the ban of regulated short selling activities and responded positively to the removal of the ban. This study supports the downward biased hypothesis which implies that the Malaysian market participants welcome regulated short selling activities.

Item Type: Article
Uncontrolled Keywords: COVID-19 pandemic, Downward biased hypothesis, Event study methodology, Malaysian financial market, Regulated short selling announcements.
Subjects: H Social Sciences > HF Commerce > HF5001-6182 Business > HF5410-5417.5 Marketing. Distribution of products
Divisions: Faculty of Business (FOB)
Depositing User: Ms Nurul Iqtiani Ahmad
Date Deposited: 05 Oct 2023 04:32
Last Modified: 05 Oct 2023 04:32
URII: http://shdl.mmu.edu.my/id/eprint/11737


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