Short Sale level and Future Stock Return: Evidence from the Thai Stock Exchange
Post by MSF Chula at Tuesday, 8 August 2017 10:35 AM

This paper investigates short sale level in Thai stock market to identify which level of
short sale can be the trigger point. Trigger point is the short sale level that being the threshold
of lower future return and separate between informative and uninformative short sale level.
Using short sale transaction in The Stock Exchange of Thailand (SET) starting from Jan 2003
to June 2014. We find that short selling activity can predict lower future return by 1.11% over
2 days holding period but there is no trigger point in Thai stock market. However, stocks with
high short sale level do not experience lower future return but experience higher future return
instead. This indicates that short selling activity in Thai stock market is equally informative
between high and low-short-sale-level stocks. Moreover, short sale activity in Thai stock
market mainly comes from individual short seller which account for 57% of total short sale
volume. After controlling for other variables which are market capitalization, book-to-market
ratio, turnover ratio, volatility and order imbalance, we find that only individual, proprietary
and institution short sellers have incremental effect to predict lower future return of 2 days
holding period.

Last updated at Tuesday, 8 August 2017 10:35 AM