Convertible Arbitrage Price Pressure and Short-Sale Constraints
Abe de Jong, Marie Dutordoir, Nathalie van Genuchten, Patrick Verwijmeren
Financial Analysts Journal | CFA INST | Published : 2012
Using a sample of 4,148 convertibles issued over 1990-2009 by companies listed in 35 countries, the authors exploited worldwide differences in short-sale constraints to examine whether short selling by convertible arbitrageurs creates downward pressure on convertible issuers' stock prices. They found that short-sale constraints have a positive effect on issue-date abnormal stock returns, which suggests that a substantial part of the stock price effect of convertible issues is attributable to convertible arbitrageurs. © 2012 CFA Institute.