Dynamic Unraveling

• 成果类型: Article; Early Access
• 署名作者: Flynn, Joel P.
• 署名单位: Yale University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.02412
• 发表日期: 2026
• 关键词: Adverse selection; liquidity; asymmetric information; financial crashes; Short-selling

摘要

This paper studies price and liquidity dynamics in the presence of costly shortselling when uninformed traders have limited willingness-to-pay to trade securities. In this setting, unraveling and Bayesian social learning interact to produce a novel mechanism, dynamic unraveling: Unraveling that generates signals that lead to future unraveling. Applying the theory, I show how dynamic unraveling explains low-volume crashes: falls in the prices of securities on low or declining trading volume. In this context, short-selling restrictions can make low-volume crashes more likely by intensifying dynamic unraveling, but liquidity injections have the opposite effect.