Table 6. Predictability of short-selling...

Table 6.

Predictability of short-selling on price crash risk with foreign ownership

	Skewness_t+1		Down-to-Up_t+1
Independent variables	Low	High	Low	High
Relss	−0.0031 (−1.00)	0.0040^** (2.15)	−0.0013 (−0.64)	0.0030^** (2.28)
Skewness	0.0213^*** (2.62)	−0.0009 (−0.11)	0.0144^*** (2.89)	0.0007 (0.15)
Kurtosis	0.0020 (0.74)	0.0022 (0.62)	0.0015 (0.99)	0.0017 (0.74)
Sigma	−0.0087 (−1.38)	−0.0277^*** (−2.74)	−0.0087^** (−2.29)	−0.0227^*** (−3.43)
Daily ret	0.0000 (−0.01)	0.0213 (1.63)	−0.0009 (−0.24)	0.0150^* (1.81)
B/M	1.2690^*** (4.23)	0.3996 (0.37)	0.7864^*** (4.82)	0.4740 (0.72)
Lev	−0.0015 (−0.53)	0.0069^* (1.72)	−0.0013 (−0.79)	0.0048^** (2.06)
ROA	−0.0085 (−0.88)	−0.0136 (−1.55)	−0.0045 (−0.74)	−0.0081 (−1.54)
LnSize	0.0733^*** (15.08)	0.0495^*** (7.38)	0.0404^*** (14.22)	0.0299^*** (7.72)
Abnormal tv	0.0365 (1.33)	0.2090 (1.53)	0.0264 (1.53)	0.1177 (1.44)
R²	0.071	0.116	0.070	0.112
Adj. R²	0.014	0.021	0.014	0.017

	Skewness_t+1		Down-to-Up_t+1
Independent variables	Low	High	Low	High
Relss	−0.0031 (−1.00)	0.0040^** (2.15)	−0.0013 (−0.64)	0.0030^** (2.28)
Skewness	0.0213^*** (2.62)	−0.0009 (−0.11)	0.0144^*** (2.89)	0.0007 (0.15)
Kurtosis	0.0020 (0.74)	0.0022 (0.62)	0.0015 (0.99)	0.0017 (0.74)
Sigma	−0.0087 (−1.38)	−0.0277^*** (−2.74)	−0.0087^** (−2.29)	−0.0227^*** (−3.43)
Daily ret	0.0000 (−0.01)	0.0213 (1.63)	−0.0009 (−0.24)	0.0150^* (1.81)
B/M	1.2690^*** (4.23)	0.3996 (0.37)	0.7864^*** (4.82)	0.4740 (0.72)
Lev	−0.0015 (−0.53)	0.0069^* (1.72)	−0.0013 (−0.79)	0.0048^** (2.06)
ROA	−0.0085 (−0.88)	−0.0136 (−1.55)	−0.0045 (−0.74)	−0.0081 (−1.54)
LnSize	0.0733^*** (15.08)	0.0495^*** (7.38)	0.0404^*** (14.22)	0.0299^*** (7.72)
Abnormal tv	0.0365 (1.33)	0.2090 (1.53)	0.0264 (1.53)	0.1177 (1.44)
R²	0.071	0.116	0.070	0.112
Adj. R²	0.014	0.021	0.014	0.017

Notes:

This table shows the Fama and MacBeth (1973) regression results of the ability of short selling to predict one-month-ahead stock price crash, by foreign ownership. We split the sample into two groups, based on foreign ownership. If a stock’s foreign ownership is above (below) the cross-sectional average, we classify it in the High (Low) group. The dependent variables are the two stock price crash risk measures, Skewness and Down-to-Up. Skewness is the stock price crash measure defined as the negative coefficient of the skewness of firm-specific daily stock returns in a given month. The firm-specific daily stock return is the regression residual from equation (1). Down-to-Up is the stock price crash measure defined as the logarithm of the standard deviation of down days, in terms of firm-specific daily returns, divided by the standard deviation of up days in a given month. We define down (up) days as the days with firm-specific daily stock returns below (above) the average in a given month. relss (%) is the average daily relative short selling activity in a given month, defined as the daily short volume divided by the daily trading volume; Kurtosis is the kurtosis of firm-specific daily stock returns in a given month; Sigma is the standard deviation of firm-specific daily stock returns in a given month; Daily ret (%) is the average daily stock return in a given month; B/M is the book-to-market ratio, defined as the value of book equity in year y-1 divided by the year-end market capitalization in year y-1; Lev is the leverage ratio, defined as total liability divided by total assets; ROA is year-end net income divided by total assets; LnSize is the logarithm of market capitalization in a given month; Abnormal tv is defined as monthly turnover minus the previous month’s turnover; and tv is turnover, defined as the monthly total number of shares traded divided by the number of shares outstanding. Intercepts are estimated but not tabulated. The t-statistics are in parentheses, and standard errors are corrected by using the Newey–West procedure;

***

;

indicate statistical significance at the 1%, 5% and 10% levels, respectively

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