An Empirical Study On The Impact Of Short Selling In The Small And Medium-sized Board Market On Stock Prices

The importance of margin trade to the capital market has increasingly been recognized by scholars.The effect of margin trade and role it plays in the stock market has also been the discuss point of many scholars.Since 1977,Miller proposed "The hypothesis of the shares overvalued" and the effect to the price discovery and the efficiency of stock's price have gotten the attention of scholars.Most scholars support the view of Miller and hold the point that margin trade and short selling has a positive effect to the price discovery and pricing efficiency.In March 2010,China carried out the pilot of margin trade and now it have been 6 years since that time.The research into the effect to Chinese stock market of short selling mechanism was limited by the dates of the margin trade and focused on the main board of the stock market paying little attention to the small and medium enterprise board.Small and medium enterprise board has its unique character,so whether the effects of short selling mechanism is consistent with the main market is worth of exploring.This paper used the sample of 55 stocks in small and medium enterprise board to analyze how short selling works on stock price and did empirical study.In order to find out whether the stock price tends to be overvalued,this paper compared the extra return of stocks before and after the event of deregulation on short-selling.On the other hand,it uses kinds of indicators to analyze the informativeness of the stock price.Through the test of overvaluing,the results show that short selling really bring significant negative return to the underlying stock after carrying out the margin trade.It show that short selling dose has the positive effect on stock price.But in the informativeness of the stock price,it plays a negative effect which is different with the main board.It may be because of the characteristic of small and medium enterprise board.