Search

Research on the Dual Impact of Short Selling Mechanism on the Stability and Efficiency of the Capital Market

Author(s)

Ruyuxuan Xie

Affiliation(s)

Jinan New Channel - JUTES High School, Jinan, Shandong, China *Corresponding Author

Abstract

As the capital market progresses, the short selling mechanism, which stands as a crucial trading arrangement, has assumed an ever more significant function. Nonetheless, the influence of short selling mechanisms on the capital market is multifaceted. They have the capacity to yield beneficial outcomes or give rise to latent hazards. Consequently, conducting a thorough examination of how short selling mechanisms affect the capital market is of substantial importance both theoretically and practically. This study centers on investigating the diverse impacts that the short selling mechanism exerts on the capital market. Through the extensive utilization of theoretical examination and empirical investigation techniques, it delves deeply into the underlying relationship between the short selling mechanism and the stability as well as the efficiency of the capital market, and, building upon this analysis, formulates pertinent policy recommendations.

Keywords

Short Selling Mechanism; Capital Market; Stability; Efficiency

References

[1] Stiglitz, J. E. (1992). Capital markets and economic fluctuations in capitalist economies. European Economic Review, 36(2-3), 269-306. [2] Coşkun, Y., Seven, Ü., Ertuğrul, H. M., & Ulussever, T. (2017). Capital market and economic growth nexus: Evidence from Turkey. Central Bank Review, 17(1), 19-29. [3] Durnev, A., Li, K., Mørck, R., & Yeung, B. (2004). Capital markets and capital allocation: Implications for economies in transition. Economics of Transition, 12(4), 593-634. [4] Jiang, H., Habib, A., & Hasan, M. M. (2022). Short selling: A review of the literature and implications for future research. European Accounting Review, 31(1), 1-31. [5] Chang, E. C., Luo, Y., & Ren, J. (2014). Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market. Journal of Banking & Finance, 48, 411-424. [6] Sobaci, C., Sensoy, A., & Erturk, M. (2014). Impact of short selling activity on market dynamics: Evidence from an emerging market. Journal of Financial Stability, 15, 53-62. [7] Li, C., Xu, H., Wang, L., & Zhou, P. (2019). Short-selling and corporate innovation: Evidence from the Chinese market. China Journal of Accounting Studies, 7(3), 293-316. [8] Boehmer, E., & Wu, J. (2013). Short selling and the price discovery process. The Review of Financial Studies, 26(2), 287-322. [9] Reed, A. V. (2013). Short selling. Annu. Rev. Financ. Econ., 5(1), 245-258. [10] Jiang, H., Habib, A., & Hasan, M. M. (2022). Short selling: A review of the literature and implications for future research. European Accounting Review, 31(1), 1-31.