TY  - JOUR
AU  - Asquith,Paul
AU  - Oman,Rebecca
AU  - Safaya,Christopher
TI  - Short Sales and Trade Classification Algorithms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14158
PY  - 2008
Y2  - July 2008
UR  - http://www.nber.org/papers/w14158
L1  - http://www.nber.org/papers/w14158.pdf
N1  - Author contact info:
Paul Asquith
MIT Sloan School of Management
100 Main Street, E62-660
Cambridge, MA 02142
Tel: 617/253-7177
Fax: 617/253-0603
E-Mail: pasquith@mit.edu

Rebecca Oman
Massachusetts Institute of Technology (MIT)
77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
E-Mail: oman@mit.edu

Christopher Safaya
Massachusetts Institute of Technology (MIT)
77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
E-Mail: csafaya@mit.edu
AB  - 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.
ER  -