Short-selling constraints and 'quantitative' investment strategies

Panagiotis Andrikopoulos, James Clunie, Antonios Siganos

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This study uses stock lending data from Data Explorers to assess the impact of short-selling constraints on the profitability of eight investment strategies. Returns from unconstrained long-short portfolios are compared with those from 'feasible' portfolios, constrained to short-selling only those shares that can be borrowed. We find that only a small percentage of the firms identified by Datastream for short-selling are available for lending, but our results suggest that differences in profitability between unconstrained and feasible strategies are statistically insignificant. We also find that the stock borrowing fee for the majority of the strategies is normally less than 1% per annum, showing that prior UK studies, which assumed that the short-selling fee is flat at 1.50% per annum, have overestimated such cost. Overall, these results indicate that stock loan unavailability and stock borrowing fees do not explain the persistence of returns from anomaly-exploiting quantitative investment strategies in the UK stock market.

Original languageEnglish
Pages (from-to)19-35
Number of pages17
JournalThe European Journal of Finance
Volume19
Issue number1
DOIs
Publication statusPublished - Jan 2013
Externally publishedYes

Fingerprint

Investment strategy
Short selling
Fees
Borrowing
Profitability
Lending
Persistence
Loans
Costs
Anomaly
Data streams
Stock market

Keywords

  • Data Explorers
  • short-selling constraints
  • stock market anomalies
  • stock-lending fee

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

Cite this

Short-selling constraints and 'quantitative' investment strategies. / Andrikopoulos, Panagiotis; Clunie, James; Siganos, Antonios.

In: The European Journal of Finance, Vol. 19, No. 1, 01.2013, p. 19-35.

Research output: Contribution to journalArticle

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