| Summary: | 博士 === 國立臺灣科技大學 === 財務金融研究所 === 98 === This study examines the impact of short sale constraints on stock price behavior using data from the Taiwan Stock Exchange. The data involves 33 constituent stocks of the Taiwan 50 index fund over the 480 days in both the pre- and post-period surrounding the lift of the uptick rule effectively on May 16, 2005. The results indicate that the R2 estimated from the market model is significantly higher in the pre-period than that in the post-period. Similarly, the cross-autocorrelation between the individual stock returns and the lagged market returns is significantly higher in the pre-period than that in the post-period. The results are consistent with the delayed price discovery hypothesis in that short sale constraints delay the incorporation of information into securities prices.
Moreover, there is no significant difference in the 3-day cumulative abnormal returns between the pre- and the post-period following large price declines. The results do not support the overvaluation hypothesis which predicts a significant overvaluation in the pre-period when the uptick rule is imposed. However, the empirical results indicate a significantly negative overnight abnormal return following the large price decline in the pre-period than that in the post-period, followed by a significantly positive trading-time abnormal return in the pre-period than that in the post-period. The results are consistent with the hypothesis that investors overreact to bad news in the presence of short sale constraints, followed by a price reversal in the subsequent trading-time period.
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