Investors' regulatory concerns and the SEC's regulation SHO pilot program on the NYSE

Examining the private-information content of short sales surrounding the implementation of the SEC's Regulation SHO-pilot program, we that informativeness of short sales on the NYSE has disappeared in pilot stocks during the pilot program. Both the shorting efficiency hypothesis and the regulatory concern hypothesis are proposed to explain this anomaly. Empirical testing results support the regulatory concern hypothesis, suggesting that the SEC's Regulation SHO-pilot program may be a problematic natural experiment because there is a propounding difference between the pilot and control samples concerning short-sellers' trading behaviour.