The Impact Of Short Selling Mechanismon Stock Pricing Efficiency On China Stock Market

Short selling mechanism in China has been launched since March 31, 2010 and Shanghai and Shenzhen 300 index futures officially launched on April 16, 2010. That is the beginning of China stock market’s short selling mechanism.China’s stock market is different from developed capital market s. In China, only part of stocks can be short sold by securities lending or stock index futures, but most of stocks can not be short sold. This kind of short selling mechanism provides us the natural experimental groups and control groups. In this paper, we take good advantages of this special short selling mechanism and divide all stocks into three groups, short selling and index futures(SIF) stock group, short selling and non- SIF stock group, non- short selling and non- SIF stock group. And the number of samples of SIF and non- short selling stock group are very small, so the paper can not take this stock group into consideration.Our study period is from January 31, 2013 to April 16, 2015. The paper uses the unbalanced panel data model, the sectional model to study whether short selling or stock index futures has an significant impact on the stock pricing efficiency.Then the pape uses the Kruskal-Wallis test to analyze the stock pricing efficiency differences among short selling and SIF stock group, short selling and non- SIF stock group, non- short selling and non- SIF stock group.The research results show that, short selling and stock index futures can both increase the stock price adjustment speed on market information, and improve stock pricing efficiency. And the stock pricing efficiency of short selling and SIF stock group is greater than another two stock groups’.So stock market pricing efficiency will be greatly enhanced by short selling and stock index futures.