Performance of Short-Selling Strategy

Woo, Min Cheol; Kim, Meong Ae

doi:2019.48.3.371

Korean J Financ Stud > Volume 48(3); 2019 > Article

Korean Journal of Financial Studies 2019;48(3):371-391.
DOI: https://doi.org/10.26845/KJFS.2019.06.48.3.371 Published online June 30, 2019.

Performance of Short-Selling Strategy

Min Cheol Woo, Meong Ae Kim

공매도전략의 투자성과 분석

우민철, 김명애

¹한국거래소
²건국대학교

Abstract

Short-sale activities affect the stock market in various aspects as it may increase information efficiency in the market by quickly reflecting negative information to the stock price, while it might be misused in the transactions based on important undisclosed information. Using the shortsale position reports from August, 30th of 2012 through June of 2017, we examined shortsale strategies consisting of a short sale and the following short covering transaction. We also analyzed the performance of the shortsale strategy. The results are as follow. First, 1,868 stocks, which is 87.21% of all listed stocks, appeared in the report and the portion of stocks involved in shortsale is higher in KOSDAQ than in KOSPI market. Second, the average profit per shortsale investment is 11.58% and foreign investors show the highest profit. Average position holding period per short sale investment was the longest in foreign investors group while average daily return was the highest in institutional investors group. Third, there was a positive relation between the shortsale magnitude and the investment performance. Daily investment returns tend to increase as the investment period until the liquidation of the short position is short or the market capitalization of the stock is smaller. This study contributes to the related literatue by examining the actual performance of shortsale investment using the data which identify short covering transactions. It also provides the performance of institutional investors and foreign investors, who are major participants in the shortsale market.

Key Words: 공매도,숏커버링,공매도 잔고 보고,회귀분석,투자성과,Short-Sale,Short-Covering,Report of Short-Sale Balance,Regression,Investment Profit