SHORT SALES ARE ALMOST INSTANTANEOUSLY BAD-NEWS - EVIDENCE FROM THE AUSTRALIAN STOCK-EXCHANGE

This paper investigates the market reaction to short sales on an intra day basis in a market setting where short sales are transparent immedi ately following execution. We find a mean reassessment of stock value following short sales of up to -0.20 percent with adverse information impounded within fifteen minutes or twenty trades. Short sales execute d near the end of the financial year and those related to arbitrage an d hedging activities are associated with a smaller price reaction; tra des near information events precipitate larger price reactions. The ev idence is generally weaker for short sales executed using Limit orders relative to market orders.