NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Short Sales and Trade Classification Algorithms

Paul Asquith, Rebecca Oman, Christopher Safaya

NBER Working Paper No. 14158
Issued in July 2008
NBER Program(s):   AP

This paper demonstrates that short sales are often misclassified as buyer-initiated by the Lee-Ready and other commonly used trade classification algorithms. This result is due in part to regulations which require short sales be executed on an uptick or zero-uptick. In addition, while the literature considers "immediacy premiums" in determining trade direction, it ignores the often larger borrowing premiums which short sellers must pay. Since short sales constitute approximately 30% of all trade volume on U.S. exchanges, these results are important to the empirical market microstructure literature as well as to measures that rely upon trade classification, such as the probability of informed trading (PIN) metric.

download in pdf format
   (93 K)

email paper

This paper is available as PDF (93 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14158

Published: Asquith, Paul & Oman, Rebecca & Safaya, Christopher, 2010. "Short sales and trade classification algorithms," Journal of Financial Markets, Elsevier, vol. 13(1), pages 157-173, February.

Users who downloaded this paper also downloaded these:
Asquith, Au, Covert, and Pathak w16282 The Market for Borrowing Corporate Bonds
Aït-Sahalia and Yu w13825 High Frequency Market Microstructure Noise Estimates and Liquidity Measures
Goetzmann, Zhu, and Bris w9466 Efficiency and the Bear: Short Sales and Markets around the World
Vayanos and Wang w15215 Liquidity and Asset Prices: A Unified Framework
Gompers, Ishii, and Metrick w8449 Corporate Governance and Equity Prices
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us