Study On The Impact Of Short-Selling On Stocks’ Price Efficiency

China launched Margin Trading trial as an initial exploration of the short-selling mechanism in 2010.With the development of the short-selling mechanism,many problems have been exposed.To solve the problem of insufficient securities sources,China introduced the "Refinancing securities" policy.Due to the late development of China’s specific national stock market,the scale of China’s short-selling transactions and related regulations are still in the development stage compared with the mature capital markets of developed countries.Therefore,it is necessary to continuously observe the impact of the short-selling mechanism.This paper chooses to conduct empirical research on the impact of short-selling mechanism on stock pricing efficiency based on literature review and theoretical analysis.This paper firstly takes the list of stocks of the inclusive securities that were expanded in China on June 23,2014 as the research object,selects the stocks joined in the "Refinancing securities" policy on May 6,2015 as the control group,and choose the second expansion of the "Refinancing securities" list on June 23,2014 as the event day,then use the Difference-in-Difference model(DID model)to study the impact of "Refinancing securities"policy.Later,for the sake of robustness,this paper study the relationship between the volume of refinancing securities trading and stock pricing efficiency.Because of the differences between this part’s results and hypothesis,the next part is to study the changes in the negative information content of the stock price before and after the stock is allowed to refinance securities transactions.The results of the study show that:(1)After the relaxation of short-selling constraints,the efficiency of stock pricing has improved.(2)The improvement in pricing efficiency of stocks eligible for vouchers is not significant.(3)The stronger the short selling,the higher the pricing efficiency.(4)After the relaxation of short-sale restrictions,the overvaluation of the underlying stock’s share price has been alleviated.The conclusions of the study show that the relaxation of short-selling constraints could indeed improve the efficiency of stock pricing.Policy makers should optimize the investor structure of short-selling business while increasing the participation in the refinancing business from both supply and demand to create a healthy and stable environment for the development of China’s capital market.