Market reactions towards inclusion and exclusion announcements of regulated short selling (RSS) stock in Bursa Malaysia: Evidence from Malaysia 2013-2016

Short selling has been allowed in Bursa Malaysia since its reintroduction in 2007. In this study, the objectives are to examine the market reactions towards the announcement of inclusion and exclusion of stocks from regulated short selling (RSS) list in Bursa Malaysia (BM) from 2013 to 2016. A total number of 216 stocks were selected for study on inclusion announcement, while 107 stocks collected for exclusion announcement. Analyses on average abnormal returns (AARs) and cumulative average abnormal returns (CAARs) were used to examine the market reaction while t-statistic was applied to test the significant of the results. This study finds that; (1) statistically significant results found for both studies on inclusion and exclusion: (2) stock prices move in uptrend prior to the announcement for both inclusion and exclusion, hence, did not support early predictions; (3) after the announcement, stock prices back to uptrend for inclusion event and continue to downtrend for exclusion. Results also show the evidences of information asymmetry or informed trader occurred prior to the announcement for both inclusion and exclusion announcements. In addition, analysis on whether firms specific variables have influences on stock return finds no relationship.