Short-sellers at home and abroad: Their respective roles in the price discovery of cross-listed firms

摘要

We examine the respective role of short selling in both the home and the host market in the price discovery of mainland Chinese firms cross-listed in Hong Kong. We find that short-sellers of A-shares in mainland China contribute significantly more to the price discovery than short-sellers of corresponding H-shares in Hong Kong, and the latter group benefits from the presence of the former group but not the other way around. Short-sellers in mainland China promptly react to the arrival of negative news, while short-sellers in Hong Kong do not react to such news, and tend to follow their counterparts in mainland China. We posit that the institutional differences in short selling between the two markets possibly explain the findings.