Dynamic Equilibrium with Costly Short-Selling and Lending Market

• 成果类型: Article
• 署名作者: Atmaz, Adem; Basak, Suleyman; Ruan, Fangcheng
• 署名单位: Purdue University System; Purdue University; University of London; London Business School; Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhad060
• 发表日期: 2024
• 页码: 444
• 关键词: short-sale constraints; asset prices; heterogeneous beliefs; institutional investors; cross-section; SHORT-SELLERS; arbitrage; restrictions; dispersion; strategies

摘要

We develop a dynamic model of costly stock short-selling and lending market and obtain implications that simultaneously support many empirical regularities related to short-selling. In our model, investors' belief disagreement leads to shorting demand, whereby short-sellers pay shorting fees to borrow stocks from lenders. Our main novel results are as follows. Short interest is positively related to shorting fee and predicts stock returns negatively. Higher short-selling risk can be associated with lower stock returns and less short-selling activity. Stock volatility is increased under costly short-selling. An application to GameStop episode yields implications consistent with observed patterns.