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Short-Selling Bans around the World: Evidence from the 2007-09 Crisis

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  • Beber, Alessandro
  • Pagano, Marco

Abstract

Most stock exchange regulators around the world reacted to the 2007-2009 crisis by imposing bans or regulatory constraints on short-selling. Short-selling restrictions were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured different degrees of stringency. We exploit this considerable variation in short-sales regimes to identify their effects with panel data techniques, and find that bans (i) were detrimental for liquidity, especially for stocks with small market capitalization, high volatility and no listed options; (ii) slowed down price discovery, especially in bear market phases, and (iii) failed to support stock prices, except possibly for U.S. financial stocks.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7557.

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Date of creation: Nov 2009
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Handle: RePEc:cpr:ceprdp:7557

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Keywords: ban; crisis; liquidity; price discovery; short selling;

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  1. Pedro A. C. Saffi & Kari Sigurdsson, 2011. "Price Efficiency and Short Selling," Review of Financial Studies, Society for Financial Studies, vol. 24(3), pages 821-852.
  2. Seraina GRUENEWALD & Alexander F. WAGNER & Rolf H. WEBER, . "Short Selling Regulation after the Financial Crisis – First Principles Revisited," Swiss Finance Institute Research Paper Series 09-28, Swiss Finance Institute.
  3. Halling, Michael & Pagano, Marco & Randl, Otto & Zechner, Josef, 2005. "Where is the Market? Evidence from Cross-Listings," CEPR Discussion Papers 4987, C.E.P.R. Discussion Papers.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Interesting readings
    by Ajay Shah in Ajay Shah's blog on 2009-11-20 20:47:00
  2. Interesting Readings for November 23, 2009
    by Ajay Shah in Citizen Economists on 2009-11-23 15:32:02
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Cited by:
  1. Robert Battalio & Hamid Mehran & Paul Schultz, 2011. "Market declines: Is banning short selling the solution?," Staff Reports 518, Federal Reserve Bank of New York.
  2. Óscar Arce & Sergio Mayordomo, 2012. "Short Sales Constraints and Financial Stability: Evidence from the Spanish 2011 Ban," Faculty Working Papers 25/12, School of Economics and Business Administration, University of Navarra.
  3. Rodrigo De-Losso & Alan De Genaro, Bruno C. Giovannetti, 2012. "Testing the Effects of Short-Selling Restrictions on Asset Prices," Working Papers, Department of Economics 2012_18, University of São Paulo (FEA-USP).

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