On the importance of fiscal space: Evidence from short sellers during the COVID-19 pandemic
利用COVID-19疫情的外生冲击，研究知情市场参与者如何将财政空间纳入交易决策，发现卖空者会针对财政空间有限国家的低财务灵活性公司进行交易，并在市场崩盘前获得异常收益，支持卖空者促进价格效率的观点。
Using the exogenous shock of the COVID-19 pandemic, we study how informed market participants incorporate fiscal space into their trading decisions. At the onset of the pandemic, short-selling activity shifted towards companies with low financial flexibility but only in countries with limited fiscal space. Among such companies, short sellers specifically targeted those that generate their revenues mainly in the domestic market. These short sellers entered their positions before the market crash, thereby generating significant abnormal returns. We find no evidence of either herding behavior prior to the market crash or a long-run performance reversal of short sellers. These findings support the notion that short sellers help to promote price efficiency in times of crisis, where governments with budgetary constraints are unable to provide sufficient stimuli to their economies.