The Stock Returns Predictability Of Short Selling

Short selling refers to the behavior that investors borrow securities from securities companies and sell them,and return the securities and interest after a period of time,China introduced the short selling trading system in March 2010,which changed the situation of "one-sided market" in China.Besides,short selling trading is an indispensable and important trading mechanism in China’s stock market,which can improve market pricing,optimize resource allocation and promote sound market development.After 12 years of development,the system of short selling trading has been continuously improved and its scale has been continuously expanded.At present,with the increasing number of investors in short selling trading,their preferences and behaviors in trading will also have a greater impact on the stock return rate.At present,there are many foreign research literatures on short selling transaction,and the whole aspect of short selling transaction has been studied from various perspectives.However,most domestic research on short selling transaction is still focused on the macro perspective,and few literatures have studied it from the micro perspective.Therefore,this paper will focus on studying the impact of the preference and behavior of short selling traders on stock returns,so as to provide investors with certain investment reference,improve investment strategies,promote the development and progress of the financial market,and improve the market efficiency.Based on the 2012 to 2019,all has the qualifications of securities trading stock as the research object,by constructing preference and behavior of the variables reflect the securities traders-Short selling preference for single variable packet analysis,portfolio analysis found that securities-lending preference and expected return has significant negative correlation relationship,proved that the securities trader’s preference and behavior will affect stock returns.To further study whether the trading divergence and information asymmetry among investors will change the impact of short selling preference on the expected return rate,the analysis is carried out by using bivariate grouping analysis and Fama-Macbeth cross-sectional regression method.The empirical results show that investors are more inclined to short selling in the period of large transaction divergence and high degree of information asymmetry,so that the balance of short selling becomes larger and the expected return rate of the underlying stock decreases.