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Korean Journal of Financial Studies 2010;39(3):449-489.
Published online September 30, 2010.
The Causal Relationship between Stock Price and Short Sales: Evidence from the Korean Stock Market
June Suh Yi, Ki Beom Binh, Gwang Ik Jang
주가와 공매도간 인과 관계에 관한 실증 연구
이준서, 빈기범, 장광익
This study examines the effectiveness of short sale ban that several countries including Korea adopted immediately after the 2008 global financial crisis. The paper analyzes the causality between short sale and stock price decreases through various methodologies. We employ VAR to identify the Granger causality and instrumental variable regression analysis to detect contemporaneous causation for the entire market as well as individual firms. Panel VAR is especially used to figure out causal relationship between short sale and stock price decreases of individual companies. In terms of short sale size we use standardized short sale value as well as original short sale value and detrended value. The study finds that short sale does not induce decreases of stock price on not only the entire market but individual firms on VAR, panel VAR, and instrumental variables regression analysis, while plunge of stock price leads to increase of short sale. Especially, stock price fall resulting from bad news on individual firms are observed to play a big role in contemporaneous causation with respect to short sale. In addition, firms where short sale causes stock price drop are discovered to have particular financial characteristics, such as large size, high liquidity, high proportion of foreign investors, high market beta, and low unsystematic risk. The study makes some contribution in that it uses for the first time real daily short sale data of individual firms from January 2006 to September 2008 during which short sale was banned. Most of the existing literatures have used short interest data, not real short sale transaction data. The study also provides in timely manner policy implications for whether short sale ban was appropriate decision making.
Key Words: 그랜저인과관계,동시대적 인과관계,주식공매도,패널 VAR,Contemporaneous Causation,Granger Causality,Panel VAR,Short Sale,VAR

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