Shortability and Asset Pricing Model: Evidence from The Hong Kong Stock Market

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dc.contributor.authorBai M
dc.contributor.authorLi X-M
dc.contributor.authorQin Y
dc.contributor.editorAlexander, C
dc.date.accessioned2017-08-13T23:10:38Z
dc.date.available2017-08-09
dc.date.available2017-08-13T23:10:38Z
dc.date.issued2017-12
dc.description.abstractThis study explores how the violation of free short selling assumption affects the performance of CAPM and the Fama-French three-factor model, as existing studies show that short-sales constraints affect asset pricing of the stocks. Using data from the Hong Kong Stock Market which has unique regulations on short selling, we conduct both time-series and cross-sectional regression analyses to evaluate the performance of the two models under the short-sales-constraints and the no-constraints market environment. The two models perform much worse in the former environment than in the latter, indicating a significant impact of the short sales constraints on the explanatory power of the models. We then augment the two models with a shortability-mimicking factor. Our results show that the factor has a significant power in explaining both time-series and cross-sectional variation in the size-B/M portfolio returns. The addition of the factor to the two models considerably increases their overall performance.
dc.description.confidentialFALSE
dc.identifier.citationJournal of Banking and Finance, 2017
dc.identifier.doi10.1016/j.jbankfin.2017.08.007
dc.identifier.elements-id366453
dc.identifier.harvestedMassey_Dark
dc.identifier.issn0378-4266
dc.identifier.urihttps://hdl.handle.net/10179/16415
dc.languageEnglish
dc.publisherElsevier BV
dc.relation.isPartOfJournal of Banking and Finance
dc.relation.isreplacedby123456789/8204
dc.relation.isreplacedbyhttp://hdl.handle.net/123456789/8204
dc.subjectAsset pricing models
dc.subjectShort-sales constraints
dc.subjectShortability factor
dc.subject.anzsrc0102 Applied Mathematics
dc.subject.anzsrc1502 Banking, Finance And Investment
dc.titleShortability and Asset Pricing Model: Evidence from The Hong Kong Stock Market
dc.typeJournal article
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/College of Business
pubs.organisational-group/Massey University/College of Business/School of Economics and Finance
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