The Research On Short-sale Restrictions And Stock Pricing Efficiency

As an important trading system innovation in financial system,short selling mechanism is widely regarded as an indispensable part of market pricing mechanism.Domestic and foreign literature on whether short selling can improve the efficiency of market pricing is still more controversial.Some scholars believe that allowing short selling can make asset prices timely and fully absorb negative market news,reduce overvaluation and improve the efficiency of asset pricing.Another part of scholars believe that allowing short selling may not improve the efficiency of market pricing,because the policy regulatory environment and market development maturity are different.Instead,the market volatility will be amplified by investors' irrational behavior and leveraged trading.Margin trading has been a credit transaction system in mature foreign markets for many years.On March 31,2010,it was officially introduced into the domestic securities market for trial.After nine years of trade development,its actual performance has caused a lot of research by domestic scholars.Based on imbalance of margin trading in China,this paper took the short selling short T+1 trading system launched on August 3,2015 as the short-constraint day to analyze the pricing efficiency differences of sample stocks in the two years before and after the short-constraint day.This paper studies the impact of different short selling restrictions on stock pricing efficiency,and also studies the impact of margin trading imbalance on stock pricing efficiency.From the perspective of the influence of short-selling restriction on investors' heterogeneous beliefs,this paper discusses its internal influence mechanism.Firstly,this paper selected the transaction data of the underlying stocks of margin trading in China from August 2013 to July 2017 as the sample data.The correlation coefficient and price lag index between the current return rate of individual stocks and the market return rate in the lag period were used to construct the indexes to measure the stock pricing efficiency,which was taken as the explanatory variable.Setting the time dummy variable before and after the short-constraint day and the inter-group dummy variable whether it is the underlying stock of margin trading.The logarithmic ratio of standardized margin trading volume is used as an indicator to measure the degree of margin imbalance,and this indicator is used as a key explanatory variable.Controlling the company size,book-to-market ratio,turnover rate,volatility,market conditions and other factors.By constructing the above multiple regression model,this paper empirically analyzes the influence of short selling restriction on stock pricing efficiency.Secondly,this paper uses the double difference model which was constructed by taking the margin trading targets as the experimental group and non-margin trading targets as the control group,and Researching respectively the effects of margin trading and short selling trading on pricing efficiency to test the robustness test of the results.Finally,this paper study the change of investors' heterogeneous beliefs before and after the short-constraint day and under different short selling restrictions to explore its influence.By empirical research,the following conclusions are drawn:(1)the pricing efficiency of margin stocks is significantly higher than that of non-margin stocks.Compared with the complete restriction on short selling,the easing of the restriction on short selling can improve the efficiency of stock pricing.(2)As for the underlying stocks of margin trading,the pricing efficiency before the short-constraint day is significantly higher than after the short-constraint day.The tighter the short-selling restrictions,the less efficient the pricing.(3)Margin imbalance as the external form of short-selling restrictions,the more serious the imbalance,the lower the efficiency of stock pricing.(4)The influence of short selling restriction on stock pricing efficiency is mainly through blocking short selling investors from entering the market,which makes investors' heterogeneous belief differences not fully released and thus reduces the efficiency of stock pricing.This paper argues that short selling mechanism is helpful to improve the pricing efficiency of China's securities market.Although the short selling T+1 trading system can stabilize the market price in the short term and alleviate investors' panic,it is not conducive to the healthy and stable development of China's securities market in the long run.Regulators should timely relax restrictions on short selling,increase the activity of short selling in the market,and ease the imbalance of margin trading.