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short sales

Robin Hanson describes a tax on short sales as a ban on bad news. Many commenters complain that there is manipulation of stock prices by shorters. I’m sure that there is a lot of that, but probably more manipulation of stock prices upwards. Why do people have asymetric views?

Prosecution for insider trading is asymetric, too. It seems to me that there is a bias that short action is more suspicious and should be subject to more scrutiny. Are the regulators subject to this bias, or just pandering to the crowd?

Reported (legal) trading by insiders in the US reflects information when it is long, but not when it is short, probably because the sales will attract more attention. Yet in places where insider trading is legal (eg, Hong Kong) reflect information on sales but not on purchases. That’s bizarre? why don’t the purchases reflect information? because the executives are overoptimistic? but why not in the US? because the US executives have such trouble selling, buying must be a big commitment, deserving more thought?


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