Finance Seminar joint with SAFE Visitors Program: Dr. Zsuzsa R. Huszar (National University of Singapore)
Speaker: Dr. Zsuzsa R. Huszar (National University of Singapore)
Title: The Role of Market Infrastructure in Price Discovery: Short Sellers’ Perspective (joint with Truong X. Duong)
Abstract: This study shows that short selling information from the new BATS exchanges has significant return predictability beyond the well-established short sale demand and short sale constraints measures. Specifically, we report 57 (43) bps monthly value-weighted (equal-weighted) abnormal returns on the long-short high-low BATS short portfolio, where both the long and short legs of strategy contribute to the profits. More importantly we show that most of the return predictability emanated from Markets Z and K, with traditional market maker fee structures. We are also able to reveal that while the Z market, institutional market captures the information at the level, in the K market, retail market, the large swings, retail sentiment shifts convey the information. Overall, our results reveal that there is still material information in short sellers’ trades, but the information dissemination conditional on market infrastructure, subject to the debate and asses fees, contributing to the With these results we contribute to the ongoing regulatory investigation, examining the impact of rebates and access fees on the quality of U.S. equity markets from the viewpoint of short sellers trading on BATS.
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