TRADE SIZE AND PRICE CLUSTERING: THE CASE OF SHORT SALES AND THE SUSPENSION OF PRICE TESTS

In this article, we compare trade size and price clustering of short sales with regular trades. We find that short sales cluster less on round sizes and round prices than do nonshort trades. When price tests are suspended, both trade size and price clustering markedly increase for short sales although the difference between shorts and nonshorts remains significant during the postsuspension period. These results are consistent with the idea that because of execution uncertainty caused by price tests, short sellers are less concerned with cognitive processing costs, negotiations costs, and the costs associated with revealing information through trade sizes.