Short-Selling Bans around the World: Evidence from the 2007-09 Crisis
AbstractMost 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7557.
Date of creation: Nov 2009
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Alessandro Beber & Marco Pagano, 2013. "Short-Selling Bans Around the World: Evidence from the 2007â€“09 Crisis," Journal of Finance, American Finance Association, American Finance Association, vol. 68(1), pages 343-381, 02.
- Alessandro Beber & Marco Pagano, 2009. "Short-Selling Bans around the World: Evidence from the 2007-09 Crisis," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 241, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 03 Sep 2011.
- Alessandro Beber & Marco Pagano, 2010. "Short-Selling Bans around the World: Evidence from the 2007-09 Crisis," Tinbergen Institute Discussion Papers 10-106/2/DSF 1, Tinbergen Institute.
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007.
"Market Liquidity and Funding Liquidity,"
NBER Working Papers
12939, National Bureau of Economic Research, Inc.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers, Financial Markets Group dp580, Financial Markets Group.
- Seraina GRUENEWALD & Alexander F. WAGNER & Rolf H. WEBER, . "Short Selling Regulation after the Financial Crisis â€“ First Principles Revisited," Swiss Finance Institute Research Paper Series, Swiss Finance Institute 09-28, Swiss Finance Institute.
- Michael Halling & Marco Pagano & Otto Randl & Josef Zechner, 2004. "Where is the Market? Evidence from Cross-Listings in the U.S," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 129, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2006.
- David Easley & Soeren Hvidkjaer & Maureen O'Hara, 2002. "Is Information Risk a Determinant of Asset Returns?," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2185-2221, October.
- Halling, Michael & Pagano, Marco & Randl, Otto & Zechner, Josef, 2005. "Where is the Market? Evidence from Cross-Listings," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4987, C.E.P.R. Discussion Papers.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Interesting readings
by Ajay Shah in Ajay Shah's blog on 2009-11-20 20:47:00
- Interesting Readings for November 23, 2009
by Ajay Shah in Citizen Economists on 2009-11-23 15:32:02
- Robert Battalio & Hamid Mehran & Paul Schultz, 2011. "Market declines: Is banning short selling the solution?," Staff Reports 518, Federal Reserve Bank of New York.
- Bai, Min & Qin, Yafeng, 2014. "Short-sales constraints and liquidity change: Cross-sectional evidence from the Hong Kong Market," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 26(C), pages 98-122.
- Stulz, Rene M. & Vagias, Dimitrios & Van Dijk, Mathijs A., 2013.
"Do Firms Issue More Equity When Markets Are More Liquid?,"
Working Paper Series
2013-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- René M. Stulz & Dimitrios Vagias & Mathijs A. van Dijk, 2013. "Do Firms Issue more equity when markets are more liquid?," NBER Working Papers 19229, National Bureau of Economic Research, Inc.
- Amelia Pais & Philip A. Stork, 2013. "Short-Selling, Leverage and Systemic Risk," Tinbergen Institute Discussion Papers 13-186/IV/DSF68, Tinbergen Institute.
- Félix, Luiz & Kräussl, Roman & Stork, Philip, 2013. "The 2011 European short sale ban on financial stocks: A cure or a curse?," CFS Working Paper Series 2013/17, Center for Financial Studies (CFS).
- Sascha FÃ¼llbrunn & Tibor Neugebauer, 2012. "Margin Trading Bans in Experimental Asset Markets," Jena Economic Research Papers 2012-058, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Anufriev, Mikhail & Tuinstra, Jan, 2013.
"The impact of short-selling constraints on financial market stability in a heterogeneous agents model,"
Journal of Economic Dynamics and Control, Elsevier,
Elsevier, vol. 37(8), pages 1523-1543.
- Anufriev, M. & Tuinstra, J., 2013. "The impact of short-selling constraints on financial market stability in a heterogeneous agents model," CeNDEF Working Papers 13-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Mikhail Anufriev & Jan Tuinstra, 2013. "The Impact of Short-Selling Constraints on Financial Market Stability in a Heterogeneous Agents Model," Working Paper Series, Economics Discipline Group, UTS Business School, University of Technology, Sydney 3, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
- Robert A. Jarrow & Martin Larsson, 2014. "Informational Efficiency under Short Sale Constraints," Papers 1401.1851, arXiv.org.
- Lensberg, Terje & Schenk-Hoppé, Klaus Reiner & Ladley, Dan, 2012. "Costs and Benefits of Speculation," Discussion Papers 2012/12, Department of Business and Management Science, Norwegian School of Economics.
- 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.
- 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, University of SÃ£o Paulo (FEA-USP) 2012_18, University of SÃ£o Paulo (FEA-USP).
- Oscar Bernal Diaz & Astrid Herinckx & Ariane Szafarz, 2013.
"Which Short-Selling Regulation is the Least Damaging to Market Efficiency? Evidence from Europe,"
Working Papers CEB, ULB -- Universite Libre de Bruxelles
13-001, ULB -- Universite Libre de Bruxelles.
- Bernal, Oscar & Herinckx, Astrid & Szafarz, Ariane, 2014. "Which short-selling regulation is the least damaging to market efficiency? Evidence from Europe," International Review of Law and Economics, Elsevier, Elsevier, vol. 37(C), pages 244-256.
- Astrid Herinckx & Ariane Szafarz, 2012. "Which Short-Selling Regulation is the Least Damaging to Market Efficiency? Evidence from Europe," Working Papers CEB, ULB -- Universite Libre de Bruxelles 12-002, ULB -- Universite Libre de Bruxelles.
- Chunmei Lin & Massimo Massa & and Hong Zhang, 2014. "Mutual Funds and Information Diffusion: The Role of Country-Level Governance," Tinbergen Institute Discussion Papers 14-079/IV/DSF76, Tinbergen Institute.
- Markus K. Brunnermeier & Martin Oehmke, 2013. "Predatory Short Selling," NBER Working Papers 19514, National Bureau of Economic Research, Inc.
- Robert Battalio & Hamid Mehran & Paul Schultz, 2012. "Market declines: what is accomplished by banning short-selling?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 18(Aug).
- Warren Bailey & Lin Zheng, 2013. "Banks, Bears, and the Financial Crisis," Journal of Financial Services Research, Springer, Springer, vol. 44(1), pages 1-51, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.