DOCSLIB.ORG

Constrained Short Selling and the Probability of Informed Trade

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Constrained Short Selling and the Probability of Informed Trade Constrained Short Selling and the Probability of Informed Trade Tyler R. Henry† University of Washington This Draft: January 2005 Abstract This paper considers the effect of private information on the returns to stocks with high levels of short interest. Using a structural trade model from the market microstructure literature, I model the impact of short selling constraints on the probability of information based trade (PIN). The model shows that PIN increases as the constraint on informed short selling is lowered. Empirically, I estimate PIN for a sample of high short interest stocks and form monthly portfolios based on PIN. After controlling for size, book-to-market, and momentum, I find that high PIN portfolios generally produce negative abnormal returns, while low PIN portfolios do not. The results support three main conclusions. First, some stocks with high levels of short interest do underperform. Second, the underperformance of high short interest stocks may be better explained by the probability of informed trading rather than by short interest levels alone. Finally, if PIN is a valid proxy for informed trading, then asymmetric information models offer new insights for the returns to high short interest stocks. I would like to thank my committee members for discussions and guidance, including Jennifer Koski (Chair), Jonathan Karpoff, Ed Rice, and Lance Young. I also appreciate the valuable comments of Bart Danielsen, Wayne Ferson, Jaehoon Hahn, Andrew Karolyi, and seminar participants at the University of Washington, the 2004 FMA Annual Meetings, and the 2004 FMA Doctoral Consortium. I am responsible for any remaining errors. † Ph.D. Student, Department of Finance and Business Economics, University of Washington, Box 353200, Seattle, WA 98195-3200. Email: [email protected]. I. Introduction This paper offers a new approach to assess the information content of short interest by examining the relationship between informed trading and the returns to high short interest stocks.1 I use a measure of the probability of informed trading derived from a microstructure trade model [Easley, Kiefer, and O’Hara (1997b)] to help explain underperformance in stocks with high levels of short interest. I find that this measure is successful at predicting underperformance in highly shorted firms. In general, the results indicate that the underperformance of high short interest stocks may be limited to stocks with high levels of informed trading. Thus, a full understanding of the returns to these stocks may require the consideration of information asymmetries. This result is not surprising given both informed and uninformed motivations for short selling. This work contributes to two areas of the literature. First, it adds to the literature examining the information content of short interest. Traditionally, this line of research tests the relationship between the level of short interest in a stock and its future returns. Theory implies that short interest may be a negative information signal. Diamond and Verrecchia (1987) show that short selling is more likely to be carried out by informed traders with negative information due to the high costs associated with short sales. Figlewski (1981) argues that the actual level of short interest is a proxy for the unfulfilled demand to short sell, and therefore represents the amount of adverse information excluded from the market. The empirical prediction that emerges from these arguments is that stocks with high short interest will have low subsequent returns. Yet, the empirical results in this area have been mixed. Early papers did not find a strong or consistent relationship between short interest and subsequent returns, and claimed that a considerable amount of short selling was arbitrage or hedging related [Brent, Morse, and Stice (1990), Figlewski and Webb (1993), Senchack and Starks (1993), Woolridge and Dickinson (1994)]. Such trades are not motivated by information and should not have predictive power for future returns. Later papers found that stocks with high levels of short interest generate subsequent negative abnormal returns, and argued that short sellers do have information [Asquith 1 Short interest is the number of outstanding short positions for an individual stock. Short interest figures are collected by the stock exchanges and released to the public on a monthly basis. All references to short interest levels in this paper refer to the short interest ratio, which is the number of short positions divided by the number of shares outstanding. Further details are contained in Section IV. and Meulbroek (1996), Gintschel (2001), Desai et al. (2002)]. Recently, Asquith, Pathak, and Ritter (2004) have questioned the robustness of these findings. The approach in these recent papers is to form monthly portfolios based on the level of short interest in a stock and test for subsequent underperformance. Following Figlewski’s (1981) assumption that short interest is a proxy for negative information, they posit that negative abnormal returns should be increasing in the level of short interest. There are two concerns with this assumption. First, as pointed out by D’Avolio (2002) and Chen, Hong, and Stein (2002), variations in short interest levels across stocks could reflect differences in the transaction costs of short selling rather than differences in information. Secondly, this assumption disregards the role of short selling related to uninformed trading strategies. The second issue is where this paper offers additional guidance. Specifically, the contribution of this paper is to more finely characterize which high short interest stocks should have low subsequent returns. Because some short selling may be informed while some may be related to uninformed arbitrage or hedging strategies, the link between the level of short interest and the level of informed trading is uncertain. High levels of short interest may or may not be indicative of high levels of information. Accordingly, the short interest level for a stock is a noisy information signal. However, any information contained in high short interest levels is, presumably, negative. In other words, high short interest indicates the direction of information, conditional on the existence of information. Consequently, those high short interest stocks for which information exists should be the ones with greater underperformance. Identifying stocks with higher levels of informed trading may increase the precision of the information signal contained in short interest levels. For example, although Senchack and Starks (1993) find a weak relation between short interest and returns, they point out that an inability to purge noninformational short sales from the short interest numbers may confound any empirical tests, and remark that “the observed market reaction to short interest announcements may be underestimated due to noninformational short sales…” (p.186). Therefore, I borrow a measure from the market microstructure literature that identifies the level of informed trading in a stock. I use this measure, the probability of informed trading (PIN), to form portfolios in an effort to better forecast future underperformance. Thus, instead of testing the impact of short interest on future returns, I test the impact of PIN on future returns for a sample of stocks with high short interest. 2 Along these lines, this paper also contributes to the literature on microstructure models of asymmetric information. In a series of papers, Easley et al. (1996, 1997a, 1997b, 1998) develop a trade based measure of asymmetric information risk (PIN) and examine its empirical applications in a variety of contexts.2 If short sellers are informed, their presence in the market increases adverse selection costs for uninformed traders and the market maker. Their influence will be particularly relevant if the population of short sellers is, on average, more informed than the population of regular sellers or buyers. To address this issue, this paper considers the effect of short sale constraints on levels of information asymmetry. Because constraints affect informed and uninformed traders differently, these constraints have implications for the probability of informed trading. Furthermore, since I am interested in the returns to stocks with high amounts of short selling, the impact of these constraints on PIN may be important. In general, this paper unites these two distinct literatures. The approach is to reframe the short interest tests into an asymmetric information context. The objective is to determine if the signal content of short interest levels is improved when controlling for the probability of information based trade. I begin with a sequential trade model that is used to derive the empirical measure for the probability of informed trading [Easley, Kiefer and O’Hara (1997b)]. I extend this model to demonstrate how constraints placed on short selling will affect this probability. I find that as the fraction of informed traders who are constrained is lowered, the probability of informed trading increases. Under these conditions, the likelihood that short selling originates from informed traders is higher. The result is a link between informed short selling and the probability of informed trade. Thus, I use PIN to proxy for the amount of informed trading in an effort to identify stocks with informed short selling. Those stocks with higher amounts of informed short selling should have a stronger relation with future returns. Namely, I hypothesize that stocks
Load more

Recommended publications
  • Short Sellers and Financial Misconduct 6 7 ∗ 8 JONATHAN M
    jofi˙1597 jofi2009v2.cls (1994/07/13 v1.2u Standard LaTeX document class) June 25, 2010 19:56 JOFI jofi˙1597 Dispatch: June 25, 2010 CE: AFL Journal MSP No. No. of pages: 35 PE: Beetna 1 THE JOURNAL OF FINANCE • VOL. LXV, NO. 5 • OCTOBER 2010 2 3 4 5 Short Sellers and Financial Misconduct 6 7 ∗ 8 JONATHAN M. KARPOFF and XIAOXIA LOU 9 10 ABSTRACT 11 12 We examine whether short sellers detect firms that misrepresent their financial state- ments, and whether their trading conveys external costs or benefits to other investors. 13 Abnormal short interest increases steadily in the 19 months before the misrepresen- 14 tation is publicly revealed, particularly when the misconduct is severe. Short selling 15 is associated with a faster time-to-discovery, and it dampens the share price inflation 16 that occurs when firms misstate their earnings. These results indicate that short sell- 17 ers anticipate the eventual discovery and severity of financial misconduct. They also convey external benefits, helping to uncover misconduct and keeping prices closer to 18 fundamental values. 19 20 21 22 SHORT SELLING IS A CONTROVERSIAL ACTIVITY. Detractors claim that short sell- 23 ers undermine investors’ confidence in financial markets and decrease market 24 liquidity. For example, a short seller can spread false rumors about a firm 25 in which he has a short position and profit from the resulting decline in the 1 26 stock price. Advocates, in contrast, argue that short selling facilitates market 27 efficiency and the price discovery process. Investors who identify overpriced 28 firms can sell short, thereby incorporating their unfavorable information into 29 market prices.
    [Show full text]
  • Asset Securitization
    L-Sec Comptroller of the Currency Administrator of National Banks Asset Securitization Comptroller’s Handbook November 1997 L Liquidity and Funds Management Asset Securitization Table of Contents Introduction 1 Background 1 Definition 2 A Brief History 2 Market Evolution 3 Benefits of Securitization 4 Securitization Process 6 Basic Structures of Asset-Backed Securities 6 Parties to the Transaction 7 Structuring the Transaction 12 Segregating the Assets 13 Creating Securitization Vehicles 15 Providing Credit Enhancement 19 Issuing Interests in the Asset Pool 23 The Mechanics of Cash Flow 25 Cash Flow Allocations 25 Risk Management 30 Impact of Securitization on Bank Issuers 30 Process Management 30 Risks and Controls 33 Reputation Risk 34 Strategic Risk 35 Credit Risk 37 Transaction Risk 43 Liquidity Risk 47 Compliance Risk 49 Other Issues 49 Risk-Based Capital 56 Comptroller’s Handbook i Asset Securitization Examination Objectives 61 Examination Procedures 62 Overview 62 Management Oversight 64 Risk Management 68 Management Information Systems 71 Accounting and Risk-Based Capital 73 Functions 77 Originations 77 Servicing 80 Other Roles 83 Overall Conclusions 86 References 89 ii Asset Securitization Introduction Background Asset securitization is helping to shape the future of traditional commercial banking. By using the securities markets to fund portions of the loan portfolio, banks can allocate capital more efficiently, access diverse and cost- effective funding sources, and better manage business risks. But securitization markets offer challenges as well as opportunity. Indeed, the successes of nonbank securitizers are forcing banks to adopt some of their practices. Competition from commercial paper underwriters and captive finance companies has taken a toll on banks’ market share and profitability in the prime credit and consumer loan businesses.
    [Show full text]
  • Auction Rate Securities 1
    Auction Rate Securities 1 Auction Rate Securities (ARS) were marketed by broker-dealers to investors, including individuals, corporations and charitable foundations as liquid, short-term, cash-equivalent investments similar to traditional commercial paper. The securities, however, were long-term floating rate bonds or preferred stock with floating rate coupons which gave them a superficial similarity to short-term investments. ARS’s liquidity and similarity to short-term investments were entirely dependent on the presence of sufficient orders to buy outstanding ARS at periodic auctions in which they were bought and sold subject to a contractual ceiling on the interest rate the issuer would have to pay. If the interest rate that would clear the market was greater than this maximum rate, the auctions “failed” and existing holders of the securities were forced to hold securities they wanted to sell and had previously thought were liquid. If the demand for an ARS was too low to clear the market, broker dealers sponsoring the auction could place bids just below the maximum interest rate to clear the auction. The lower the public demand for an issue, the larger the quantity broker dealers had to buy to avoid a failed auction. Participating broker dealers had better information than public investors about the creditworthiness of the ARS issuers and were the only parties with information about the broker dealers’ holdings and inclination to abandon their support of the auctions. In addition, brokerage firms involved in the auctions knew of temporary maximum rate waivers negotiated with the issuers and the ratings agencies that allowed auctions that would have failed in late 2007 to continue to clear.
    [Show full text]
  • Brut FIX Specifications
    Brut, LLC Title: Brut ECN Order API with the FIX Protocol. Synopsis: Brut ECN API for the complete handling of orders with the Brut system from an external source. Status: Release 1.29g Date: June 2005 File Name: Brut-fix-standard.doc Version: Release 1.29g Personal And Confidential - Brut's Order API Copyright 2005, The Nasdaq Stock Market, Inc. All rights resewed. Brut is a facility of The Nasdaq Stock Market, Inc. CONTENTS: I. INTRODUCTION 1.1. Order Entry 1.2. Order Cancel 1.3. Order CancelReplace 1.4. Order Brut Only 1.5. Order Through Brut 1.6. Order Cross 1.7. Order Hunter 1.8. Order Market 1.9. Order Discretion 1.10. Order Institutional Handling 1.11. Order Pegging 1.12. Order Directed Cross 1.13. Order Post-Only 1.14. Order Aggressive Cross 1.15. Order Super Aggressive Cross 2. REQUIREMENTS AND PROCEDURES 2.1. Version FIX 4.0 2.2. Header Field 2.3. Session Protocol 3. FIELD AND HEADER DEFINITION 3.1. Field Definition 3.2. FIX Required Fields 3.3. Required Empty Fields 3.4. FIX Header Definition 3.5. Time In Force Definition 3.6. Liquidity Flag Definition 4. IN BOUND MESSAGES 4.1. New Order Single 4.2. Order CancelReplace Request 4.3. Order Cancel Request 5. OUT BOUND MESSAGES 5.1. Execution Report 5.2. Order Cancel Reject 5.3. Inbound Request Resulting with Outbound Messages Personal And Confidential - Brut's Order API Copyright 2005, The Nasdaq Stock Market, Inc. All rights reserved. Brut is a facility of The Nasdaq Stock Market, Inc.
    [Show full text]
  • Auction Rate Securities Issue Brief
    C ALIFORNIA DEBT AND ISSUE BRIEF INVESTMENT ADVISORY California Debt and Investment Advisory Commission August 2004 C OMMISSION AUCTION RATE SECURITIES Douglas Skarr CDIAC Policy Research Unit The Auction Rate Securities market has Securities must carefully evaluate the current expanded significantly in the public finance environment, their objectives, and consider how sector since 2001. Nationwide, issuance of this debt will be managed over the long term. auction rate securities, including the public finance area, grew from $100 billion in the This Issue Brief provides an overview of the first quarter of 2002 to $200 billion by the end market, mechanics, costs, benefits and risks of the fourth quarter of 2003. Public finance associated with Auction Rate Securities. has become the fastest-growing sector to use auction rate securities, with total issuance I. DEFINITION AND PURPOSE projected to grow at double-digit rates in the Auction Rate Securities (ARS) are long term, future (see Figure 1). variable rate bonds tied to short term interest rates. ARS have a long term nominal maturity Figure 1 – ARS Issues Outstanding with interest rates reset through a modified ARS Outstanding 2002-2003 Dutch auction, at predetermined short term 250 intervals, usually 7, 28, or 35 days. They trade 200 at par and are callable at par on any interest payment date at the option of the issuer. 150 Interest is paid at the current period based on 100 the interest rate determined in the prior auction ($)In Billions period. 50 0 Although ARS are issued and rated as long term Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- 2002 2002 2002 2002 2003 2003 2003 2003 bonds (20 to 30 years), they are priced and Total Municipal traded as short term instruments because of the liquidity provided through the interest rate reset The use of auction rate financing is becoming mechanism.
    [Show full text]
  • Order Approving a Proposed Rule Change to Add a New Discretionary Limit Order Type Called D-Limit
    SECURITIES AND EXCHANGE COMMISSION (Release No. 34-89686; File No. SR-IEX-2019-15) August 26, 2020 Self-Regulatory Organizations; Investors Exchange LLC; Order Approving a Proposed Rule Change to Add a New Discretionary Limit Order Type Called D-Limit I. Introduction On December 16, 2019, the Investors Exchange LLC (“IEX” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)1 and Rule 19b-4 thereunder,2 a proposed rule change to adopt a new order type, the Discretionary Limit order (“D-Limit”). The proposed rule change was published for comment in the Federal Register on December 30, 2019.3 On February 12, 2020, the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.4 On March 27, 2020, the Commission instituted proceedings to determine whether to approve or disapprove the proposed rule change (“OIP”).5 This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 See Securities Exchange Act Release No. 87814 (December 20, 2019), 84 FR 71997 (“Notice”). Comments on the proposed rule change can be found at https://www.sec.gov/comments/sr-iex-2019-15/sriex201915.htm. 4 See Securities Exchange Act Release No. 88186 (February 12, 2020), 85 FR 9513 (February 19, 2020). 5 See Securities Exchange Act Release No. 88501 (March 27, 2020), 85 FR 18612 (April 2, 2020).
    [Show full text]
  • Equities: Characteristics and Markets I. Reading. A. BKM Chapter 3
    Lecture 3 Foundations of Finance Lecture 3: Equities: Characteristics and Markets I. Reading. A. BKM Chapter 3: Sections 3.2-3.5 and 3.8 are the most closely related to the material covered here. II. Terminology. A. Bid Price: 1. Price at which an intermediary is ready to purchase the security. 2. Price received by a seller. B. Asked Price: 1. Price at which an intermediary is ready to sell the security. 2. Price paid by a buyer. C. Spread: 1. Difference between bid and asked prices. 2. Bid price is lower than the asked price. 3. Spread is the intermediary’s profit. Investor Price Intermediary Buy Asked Sell Sell Bid Buy 1 Lecture 3 Foundations of Finance III. Secondary Stock Markets in the U.S.. A. Exchanges. 1. National: a. NYSE: largest. b. AMEX. 2. Regional: several. 3. Some stocks trade both on the NYSE and on regional exchanges. 4. Most exchanges have listing requirements that a stock has to satisfy. 5. Only members of an exchange can trade on the exchange. 6. Exchange members execute trades for investors and receive commission. B. Over-the-Counter Market. 1. National Association of Securities Dealers-National Market System (NASD-NMS) a. the major over-the-counter market. b. utilizes an automated quotations system (NASDAQ) which computer-links dealers (market makers). c. dealers: (1) maintain an inventory of selected stocks; and, (2) stand ready to buy a certain number of shares of stock at their stated bid prices and ready to sell at their stated asked prices. (a) pre-Jan 21, 1997, up to 1000 shares.
    [Show full text]
  • Hybrid Securities
    Analysis MULTI-JURISDICTIONAL GUIDE 2015/16 CAPITAL MARKETS Hybrid securities: an overview Ze'-ev D Eiger, Peter J Green, Thomas A Humphreys and Jeremy C Jennings-Mares Morrison & Foerster LLP global.practicallaw.com/1-517-1581 The history of hybrid securities may well be divided into two x The main bank regulatory requirements and how these differ by periods: pre-financial crisis and post-financial crisis. Before the jurisdiction. crisis, hybrid issuances by financial institutions including banks and insurance companies, and corporate issuers, which are generally x The main tax considerations and how these differ by jurisdiction. utilities, were quite significant. Such product structuring efforts x The accounting considerations. resulted in a vast array of hybrid products, such as trust preferred securities, real estate investment trust (REIT) preferred securities, x The ratings considerations. perpetual preferred securities and paired or stapled hybrid x How hybrid securities can be offered and how and to whom they structures. Following the financial crisis, regulators have been are usually marketed. focused on enhancing the regulatory capital requirements applicable to financial institutions and ensuring that there is Format greater transparency regarding financial instruments. Regulatory reform will continue to affect the future of hybrid capital. While Hybrid securities include: financial institutions have focused in recent years on non- x Certain classes of preferred stock. cumulative perpetual preferred stock and contingent capital instruments, "traditional" hybrids, such as trust preferred x Trust preferred securities (for non-bank issuers). securities, remain popular with corporate issuers. x Convertible debt securities (for non-bank issuers). This article provides a brief overview of the principal structuring, x Debt securities with principal write-down features.
    [Show full text]
  • Changing Business Models of Stock Exchanges and Stock Market Fragmentation
    OECD Business and Finance Outlook 2016 Changing business models of stock exchanges and stock market fragmentation. This chapter from the 2016 OECD Business and Finance Outlook provides an overview of structural changes in the stock exchange industry. It provides data on CHANGING mergers and acquisitions as well as the changes in the aggregate revenue structure of major stock exchanges. It describes the fragmentation of the stock market resulting from an increase in stock exchange-like trading venues, such as alternative trading BUSINESS MODELS systems (ATSs) and multilateral trading facilities (MTFs), and a split between dark (non-displayed) and lit (displayed) trading. Based on firm-level data, statistics are provided for the relative distribution of stock trading across different trading venues as well as for different OF STOCK EXCHANGES trading characteristics, such as order size, company focus and the total volumes of dark and lit trading. The chapter ends with an overview of recent regulatory initiatives aimed at maintaining market fairness and a level playing field among investors. AND STOCK MARKET Find the OECD Business and Finance Outlook online at www.oecd.org/daf/oecd-business-finance-outlook.htm FRAGMENTATION This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD Business and Finance Outlook 2016 © OECD 2016 Chapter 4 Changing business models of stock exchanges and stock market fragmentation This chapter provides an overview of structural changes in the stock exchange industry.
    [Show full text]
  • Derivative Securities
    2. DERIVATIVE SECURITIES Objectives: After reading this chapter, you will 1. Understand the reason for trading options. 2. Know the basic terminology of options. 2.1 Derivative Securities A derivative security is a financial instrument whose value depends upon the value of another asset. The main types of derivatives are futures, forwards, options, and swaps. An example of a derivative security is a convertible bond. Such a bond, at the discretion of the bondholder, may be converted into a fixed number of shares of the stock of the issuing corporation. The value of a convertible bond depends upon the value of the underlying stock, and thus, it is a derivative security. An investor would like to buy such a bond because he can make money if the stock market rises. The stock price, and hence the bond value, will rise. If the stock market falls, he can still make money by earning interest on the convertible bond. Another derivative security is a forward contract. Suppose you have decided to buy an ounce of gold for investment purposes. The price of gold for immediate delivery is, say, $345 an ounce. You would like to hold this gold for a year and then sell it at the prevailing rates. One possibility is to pay $345 to a seller and get immediate physical possession of the gold, hold it for a year, and then sell it. If the price of gold a year from now is $370 an ounce, you have clearly made a profit of $25. That is not the only way to invest in gold.
    [Show full text]
  • Options and the Bubble
    Options and the Bubble ROBERT BATTALIO and PAUL SCHULTZ* ABSTRACT Many believe that a bubble existed in Internet stocks in the 1999 to 2000 period, and that short-sale restrictions prevented rational investors from driving Internet stock prices to reasonable levels. In the presence of such short-sale constraints, option and stock prices could decouple during a bubble. Using intraday options data from the peak of the Internet bubble, we find almost no evidence that synthetic stock prices diverged from actual stock prices. We also show that the general public could cheaply short synthetically using options. In summary, we find no evidence that short-sale restrictions affected Internet stock prices. *Both authors, Mendoza College of Business, University of Notre Dame. We thank Morgan Stanley & Co., Inc. for financial support. The views expressed herein are solely those of the authors and not those of any other person or entity including Morgan Stanley. We thank an anonymous firm for providing the option data used in our analysis. We gratefully acknowledge comments from seminar participants at the University of North Carolina, the University of Notre Dame, the 2005 American Finance Association meetings, the 2005 Morgan Stanley Equity Microstructure Conference, the 2005 Western Finance Association meetings, Marcus Brunnermeier, Shane Corwin, Tim Loughran, Stewart Mayhew, Allen Poteshman, Matthew Richardson, Robert Whitelaw, and an anonymous referee. Prices of Nasdaq-listed technology stocks rose dramatically in the late 1990s, peaked in March 2000, and then lost more than two-thirds of their value over the next two years. Many of the largest price run-ups and subsequent collapses were associated with Internet stocks.
    [Show full text]
  • (Equity Shares, Debentures, Bonds) DOS Avail Nomination for All Your
    SHARE & DEBENTURE HOLDERS (Equity Shares, Debentures, Bonds) DOS 9 Avail nomination for all your investments without fail 9 Convert your physical certificates in to demat form by opening demat a/c 9 Provide your PAN card details in case of transfer / transmission of shares in physical form 9 Keep track of your investments on regular basis 9 Be alert to any public announcements on the shares of the companies that you have invested 9 Be aware that an intermediary or its staff making a recommendation, is required to disclose their interest/ position in that scrip 9 Read the Annual Report and enclosed explanatory statements, if any, before attending General Meetings 9 In case of any grievance, contact the compliance officer of the company / Debenture Trustee (DT) Be aware that listed companies, Registrar and Share Transfer Agents (RTA) and DTs are required to have a dedicated Email ID for registering your complaints 9 Approach SEBI, if grievance is not redressed by the Company / DT 9 Be aware that investor complaints against listed companies are displayed on the website(s) of SE 9 Be aware that the details of disposal of arbitration proceedings are displayed on the website(s) of SE DON’TS 8 Do not invest with borrowed money 8 Do not expect unrealistic / guaranteed returns 8 Do not be influenced by advertisement / advices / rumours / unauthentic news promising unrealistic gains and windfall profits in mass media 8 Do not be guided by astrological predictions on share prices and market movements 8 Do not fall prey to market rumours / ‘hot
    [Show full text]