Arbitrage Involvement and Security Prices
研究发现，当允许卖空时，对冲基金会更积极地买入看似被低估的股票，从而纠正错误定价，使价格回归基本面。
We propose that hedge funds more aggressively buy underpriced stocks when they are allowed to short. To test our proposition, we utilize the institutional feature in Hong Kong in virtue of which only stocks added to a special list can be shorted. Our first-stage analysis uses hedge fund holdings data and provides evidence that the emergency of shortable securities, indeed, causes hedge funds to more aggressively buy seemingly underpriced stocks. Our second-stage analysis presents evidence that hedge funds’ increased involvement in these stocks helps correct underpricing and moves prices in the direction of fundamentals. This paper was accepted by Lauren Cohen, finance. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2912 .