Short Selling, Information Dissemination And Assets Price Behavior

Under the background of the introduction of short selling in China, thedissertation viewed the information in the financial market as a link to study the wayswhich short selling influence the assets price behaviors and the process that shortselling affected the information dissemination in financial market and the methodshow to use short selling to create the investment strategy based on financial marketmicrostructure theory.The detailed content is as follows:Comparative study the models of development of short selling. Throughcomparative analysising the four types of the short selling models in other developedmarket, the dissertation concluded the development trendency of short selling inChina.Study on the issue which short selling influence liquidity and volatility of market.Theoretical Studies have shown that short selling can improve the level of liquidityand smoothe the volatility of the market by adjusting the elasticity of demand andsupply. Using the high frenquency data in the market, this dissertation empiricalexamined the relationship between short selling and the assets price behaviors both inHongKong market and Chinese mainland market. The results showed that shortselling would neither improving the volatility of market nor smoothing it. InHongKong market, short selling helped to improve the liquidity of the assets, butthere's no causaliy between short selling and liquidity in Chinese mainland market.Study on the process which short selling affected the information dissemination infinancial market. The dissertation developed the original model of informationdissemination and empirical study on the case in Chinese market by the extendedmodel of information dissemination which introduced the short selling restraint. Theresults showed that short selling can increase the proportion of informed trading, andincrease the PIN. The information quality in the market would upgrade with theproportion of informed trading.Study on the activity of short selling in creating the quantitative investmentstrategy. This chapter starting from how to use short selling in the investment strategy to illustrate the short selling played a key role in the quantitative investment. Weconstructed contrarian strategy by long-short portfolio with short selling. From theperspective of liquidity, we focused on the pattern of return correlation in Chinesestock market for the first time. In short terms, this long-short portfolio showed a goodperformance in profitability. Therefore, liquidity is the main factors of constructingconstrain strategy in short terms.