Understanding short selling activity in the hospitality industry

Hung Kot; Ming-Hsiang Chen; Adrian Wai Kong Cheung; Haiyu Huang

doi:10.1016/j.ijhm.2019.03.029

Understanding short selling activity in the hospitality industry

Hung Kot, Ming-Hsiang Chen, Adrian Wai Kong Cheung, Haiyu Huang

College of Business, Government and Law

Research output: Contribution to journal › Article

1 Citation (Scopus)

Abstract

The objective of the study is to examine short selling activity in the hospitality industry. Using short interest from 1996 to 2015 in airline, gambling, hotel and restaurant firms, we analyze their demand and supply factors for short selling. Results from multivariate regression reveal five interesting findings. First, short sellers short their hospitality stocks because of overvaluation, arbitrage and hedging from stock options and convertible bonds. Second, short sellers follow momentum strategies and short more stocks if there is a large divergence in investors’ opinions. Third, for the supply side, the level of institutional ownership has a positive effect on short selling, but its concentration has a negative effect. Fourth, the test results of the sub-periods and individual industries show that the supply side is quite similar but there is a large variation in demand-side variables. Finally, heavily shorted hospitality stocks have poor future one-year performance.

Original language	English
Pages (from-to)	136-148
Number of pages	13
Journal	International Journal of Hospitality Management
Volume	82
DOIs	https://doi.org/10.1016/j.ijhm.2019.03.029
Publication status	Published - 2019

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title = "Understanding short selling activity in the hospitality industry",

abstract = "The objective of the study is to examine short selling activity in the hospitality industry. Using short interest from 1996 to 2015 in airline, gambling, hotel and restaurant firms, we analyze their demand and supply factors for short selling. Results from multivariate regression reveal five interesting findings. First, short sellers short their hospitality stocks because of overvaluation, arbitrage and hedging from stock options and convertible bonds. Second, short sellers follow momentum strategies and short more stocks if there is a large divergence in investors{\textquoteright} opinions. Third, for the supply side, the level of institutional ownership has a positive effect on short selling, but its concentration has a negative effect. Fourth, the test results of the sub-periods and individual industries show that the supply side is quite similar but there is a large variation in demand-side variables. Finally, heavily shorted hospitality stocks have poor future one-year performance.",

author = "Hung Kot and Ming-Hsiang Chen and Cheung, {Adrian Wai Kong} and Haiyu Huang",

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AU - Huang, Haiyu

PY - 2019

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AB - The objective of the study is to examine short selling activity in the hospitality industry. Using short interest from 1996 to 2015 in airline, gambling, hotel and restaurant firms, we analyze their demand and supply factors for short selling. Results from multivariate regression reveal five interesting findings. First, short sellers short their hospitality stocks because of overvaluation, arbitrage and hedging from stock options and convertible bonds. Second, short sellers follow momentum strategies and short more stocks if there is a large divergence in investors’ opinions. Third, for the supply side, the level of institutional ownership has a positive effect on short selling, but its concentration has a negative effect. Fourth, the test results of the sub-periods and individual industries show that the supply side is quite similar but there is a large variation in demand-side variables. Finally, heavily shorted hospitality stocks have poor future one-year performance.

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DO - 10.1016/j.ijhm.2019.03.029

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