Short-Selling with a Short Wait: Trade- and Account-Level Analyses in Korean Stock Market

38 Pages Posted: 14 Feb 2015 Last revised: 10 Feb 2017

See all articles by Kuan-Hui Lee

Kuan-Hui Lee

Seoul National University Business School

Shu-Feng Wang

National Central University, Department of Finance; Ajou University - Department of Business Administration

Date Written: January 27, 2016

Abstract

We examine the day trading short-selling trades, which are initiated and closed on the same day. Using the proprietary dataset, which covers the comprehensive trading records at the trade- as well as account-level in Korean stock market, we show that the day trading short-selling is pervasive, accounting for 42% of total shorted shares, and that the individual day traders in general make positive profits from short-selling even when transaction costs are considered. We further investigate the timing of short-selling and the covering transactions and find that traders who short stocks in the morning and hold the position longer, and those who short stocks with high intraday volatility earn higher profit. In addition, we find that day traders make profits by executing numerous trades to exploit short-term small price fluctuations. Lastly, we compare the profitability of day trading short-selling with that of day trading long-selling and show that the former shows the superior performance to the latter.

Keywords: Short selling; short cover; day trading; individual investor; emerging market; Korean stock market

JEL Classification: G01, G12, G14

Suggested Citation

Lee, Kuan-Hui and Wang, Shu-Feng, Short-Selling with a Short Wait: Trade- and Account-Level Analyses in Korean Stock Market (January 27, 2016). Published: Pacific-Basin Finance Journal 38, 209-222, 2016, Available at SSRN: https://ssrn.com/abstract=2564649 or http://dx.doi.org/10.2139/ssrn.2564649

Kuan-Hui Lee

Seoul National University Business School ( email )

703 LG-bldg, Business School,
Seoul National Univ., 1 Kwanak-Ro, Kwanak-Gu
Seoul, 151-916
Korea, Republic of (South Korea)
+82 2 880-6924 (Phone)

HOME PAGE: http://sites.google.com/site/kuanlee70/

Shu-Feng Wang (Contact Author)

National Central University, Department of Finance ( email )

No. 300, Jhongda Rd, Jhogli City, Taoyuan, Taiwan,
Jhongli, TY 32001
Taiwan
886-3-4227151 # 66261 (Phone)

Ajou University - Department of Business Administration ( email )

206 Worldcup-ro
Yeongtong-gu
Suwon, 443-749
Korea, Republic of (South Korea)

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