The effect of short selling on volatility and jumps

Glenn Kit Foong Ho; Sirimon Treepongkaruna; Marvin Wee; Chaiyuth Padungsaksawasdi

doi:10.1177/0312896221996416

The effect of short selling on volatility and jumps

Glenn Kit Foong Ho, Sirimon Treepongkaruna, Marvin Wee, Chaiyuth Padungsaksawasdi^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

The evidence is mixed regarding the role of short sellers on stock market efficiency, with the majority of studies assessing short selling activities during abnormal market conditions. This study investigates the effect of short selling on stock volatility during normal market conditions in the Australian stock market using various proxies for volatility and trading activities. While short volume does not supplant the number of trades in the volume and volatility relationship, our results suggest that short selling has some incremental positive effects on volatility. Overall, our vector autoregression (VAR) analysis suggests that trading by short sellers increases volatility even during normal market conditions.

Original language	English
Pages (from-to)	34-52
Number of pages	19
Journal	Australian Journal of Management
Volume	47
Issue number	1
DOIs	https://doi.org/10.1177/0312896221996416
Publication status	Published - Feb 2022

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title = "The effect of short selling on volatility and jumps",

abstract = "The evidence is mixed regarding the role of short sellers on stock market efficiency, with the majority of studies assessing short selling activities during abnormal market conditions. This study investigates the effect of short selling on stock volatility during normal market conditions in the Australian stock market using various proxies for volatility and trading activities. While short volume does not supplant the number of trades in the volume and volatility relationship, our results suggest that short selling has some incremental positive effects on volatility. Overall, our vector autoregression (VAR) analysis suggests that trading by short sellers increases volatility even during normal market conditions.",

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AU - Wee, Marvin

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The effect of short selling on volatility and jumps

Abstract

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