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The purpose of this paper is to investigate what is denoted as episodes of concentrated short‐selling activity, or consecutive days of abnormal short‐sale activity in a particular stock. The motivation to do so is two fold. First, US regulators and regulators in other countries have restricted short selling in order to protect the integrity of markets. Second, there is some conflicting academic research determining whether short sellers are manipulative in nature.

After defining these episodes by concentrated short selling, the paper examines returns before and after to determine whether these episodes target struggling stocks and whether these episodes predict negative returns.

Contrary to the argument that episodes of concentrated shorting activity target struggling stocks, it is found that these episodes follow periods of positive returns. Further, it is found that abnormal volatility and high trading volume also predict the occurrence of these episodes. These results suggest that concentrated shorting occurs in stocks that are increasing in price during periods of heterogeneity among investors expectations (Berkman et al.). It is also found that short sellers during bear raids are able to predict when prices reverse as returns become negative the day after the last day of the raid. Combined, the results suggest that bear raids by short sellers are important for the efficiency of markets.

The results from this study have important regulatory implications as well as implications regarding the informational efficiency of stock prices.

The purpose of this paper is to take advantage of a natural experiment in Taiwan to test the effect of short‐sales constraints on price dynamics.

Since September 1998, short‐selling is banned at a price below the close price of the previous trading day. The new rule creates unique daily dynamics of short‐sales constraints. The paper employs a difference‐in‐difference method to evaluate whether the short‐sales constraint rule plays an important role in the price dynamics.

The results show that stock prices react to information in a way similar to if short‐selling was not banned. This is in line with the implication of a rational expectation framework like Diamond and Verrecchia.

The paper has implications on the short selling bans in the 2008/2009 credit crisis and the European debt crisis because the bans are public information as those in this setting. The rational agents in the market could incorporate the bans into price beliefs which could lead to the ineffectiveness of the policy. The short‐sales constraints may be widely imposed in the crisis but they are not the effective tools to alleviate downward price pressures.

The results suggest that the effort of the government to boost stock price by imposing short sales constraints will not be effective if rational investors take the constraints into account while forming their beliefs.

Unlike existing short‐sales constraint proxies like short interest or lending fees, the dynamic constraints do not suffer from endogeneity. Moreover, the constraints are public information and thus ideal for testing the rational expectation models, in which investors have to be aware of the level of the constraints.

Research draws the distinction between noise traders and informed traders. Research also documents market biases in equity returns due to cloud cover, a non‐informational (noise) event, showing that returns decrease on cloudy days. The purpose of this paper is to investigate the trading behaviour of short‐sellers, who are considered informed traders, conditioning on the level of cloudiness, and find an increase in short selling with the level of cloudiness. Additionally, the paper finds decreases in short selling the three days prior to a cloudy day (or series of cloudy days).

The authors replicate the weather anomaly in stock returns reported in the literature for the sample period, and then study the trading behaviour of short sellers conditioned on cloud cover. Additionally the authors treat cloud cover as an event and study short selling volume in the pre‐event window.

The paper finds an increase in short selling with the level of cloudiness. Additionally, the paper finds decreases in short selling, relative to the event day(s), in the three days prior to a cloudy day (or series of cloudy days).

The authors believe that they are the first to document that weather impacts short seller's trading behaviour. The authors argue that the results point towards a behavioural bias.

The purpose of this paper is to study short sales trading as part of the New York Stock Exchange (NYSE) batch open and National Association of Securities Dealers Automated Quotations (NASDAQ) opening cross. The paper examines whether short transactions at the open can predict future returns.

The study tests to see if short transactions in the NYSE opening batch trade and NASDAQ opening cross are informative of future returns.

It is found that a stock's opening‐trade short volume is predictive of its short volume for the rest of trading day, positively related to its previous‐day price change, and positively related to its overnight price change at the opening trade on option‐expiration Fridays when the stock is part of the Standard and Poor (S and P) 500 index.

While previous research shows that intraday short sale trades are informative, this is the first paper to examine the opening trade of the day, and whether these short sales are informative.

The purpose of this paper is to study the relationship between excess returns and short sale activities under unexpected informed and uninformed short sales. It is found that in general, the unexpected informed short sale is a bearish signal and has a negative effect on excess returns, while the unexpected uninformed short sale is a bullish signal and has a positive effect on excess returns. It is also found that short sales of large‐cap and frequently traded stocks are more likely to be uninformed, whereas short sales of small‐cap and infrequently traded stocks are more likely to be informed.

Following Conrad's method, the paper differentiates between two short‐sale scenarios: the expected and the unexpected short sales. For the unexpected short sales, the author further differentiates between informed and uninformed short sales. The paper then anatomizes the process into three periods to study the whole process.

The results indicate that in general, the unexpected informed short sale is a bearish signal and has a negative effect on excess returns, while the unexpected uninformed short sale is a bullish signal and has a positive effect on excess returns. The paper also examines the stock characteristics under each scenario and finds that short sales of large‐cap stocks and frequently traded stocks are more likely to be uninformed, while short sales of small‐cap and low frequency stocks are more likely to be informed.

In contrast to Conrad, the paper uses daily short interest and trading data instead of bimonthly short interest data. This is the first contribution of this study. As Diether et al. have stated, it is important to study short‐selling activity at a higher frequency. Although Conrad focused on the price reaction prior to the short interest announcement day, this paper investigates the price reaction both prior to and following the short interest announcement day. This is the second contribution of this study. The third contribution of the paper involves anatomizing the short‐sale process into three periods and investigating the price movement.

Before providing an overview of the conference with the above title and this Special Issue, this paper aims to present a view of the meaning of systemic risk, factors that affect systemic risk and measures of systemic risk. Thereafter, the conference presentations and the papers in this issue are summarized.

Characteristics and measures of systemic risk are reviewed. Conference papers and presentations are summarized.

While some aspects of systemic risk of a financial institution can be measured, an important aspect associated with contagion through markets is not easily captured by simple measures.

The conference and the papers in this issue contribute to the policy debate about sources and characteristics of systemic risk.