Last Modified

• March 22, 2019

Creator

• Ringgenberg, Matthew
  • Affiliation: Kenan-Flagler Business School

Abstract

• Using a novel database that contains information on the quantity of shares demanded and supplied in the equity lending market, I test a previously unexplored implication that follows from models of heterogeneous beliefs: the idea that short sales lead to increased volatility because they alter the supply of shares in the market. Because short sales and returns are endogenously determined, I use an instrumental variables framework to identify their relation. Specifically, I use shifts in the lendable supply of shares to identify the impact that short sales have on both the level and volatility of returns and I find evidence that short sales lead to higher contemporaneous volatility. Moreover, I find that this effect is strongest when demand curves are more likely to be downward sloping as a result of heterogeneous beliefs, a finding consistent with the predictions of heterogeneous belief models. In other words, I find that when there is disagreement among investors, the trades of short sellers lead to increased volatility.

Date of publication

• May 2011

DOI

• https://doi.org/10.17615/vyef-mp37

Resource type

• Dissertation

Rights statement

• In Copyright

Note

• "... in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Kenan-Flagler Business School (Finance)."

Advisor

• Reed, Adam

Degree granting institution

• University of North Carolina at Chapel Hill

Language

• English

Publisher

• University of North Carolina at Chapel Hill

Place of publication

• Chapel Hill, NC

Access

• Open access

Parents:

This work has no parents.

Items

Thumbnail	Title	Date Uploaded	Visibility	Actions
	When short sellers agree to disagree : short sales, volatility, and heterogeneous beliefs	2019-04-09	Public	Press to Select an action Download