Short Selling Announcements and Stock Price Reactions: Evidence from the Malaysian Stock Market
Chan, Kar Hoong (2010) Short Selling Announcements and Stock Price Reactions: Evidence from the Malaysian Stock Market. [Dissertation (University of Nottingham only)] (Unpublished)
This study aims to examine stock price reactions on selected stocks listed on Kuala Lumpur Stock Exchange (KLSE) vis-à-vis the short selling announcements. On 28th August 1997, the regulator of Malaysia re-impose short selling restrictions, there are 50 stocks which are restricted at this time. Subsequently, the regulator made the further removal of short selling restrictions announcement on 22nd December 2006 which there are 70 stocks are being selected. Both events provide some implications to investors on the market reactions on the short selling announcement. It is argued that stock prices are biased upward if short selling restrictions are present. If short selling restrictions exist, investors will not be able to react on the negative information, thus, stock prices will bias upward. Conversely, it is claims that stock prices will bias downward if short selling activities are restricted. This is because short sales restrictions would reduce the speed of adjustment of stock prices towards negative information. In another words, removal of short selling restrictions will help to complete the market by permitting fuller prices discovery.
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