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


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  • Alessandro Beber

    (University of Amsterdam)

  • Marco Pagano

    (Universita di Napoli Federico II, CSEF, EIEF and CEPR)


Most stock exchange regulators around the world reacted to the 2007-2009 crisis byimposing bans or regulatory constraints on short-selling. Short-selling restrictions wereimposed and lifted at different dates in different countries, often applied to different sets ofstocks and featured different degrees of stringency. We exploit this considerable variationin 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 bearmarket phases, and (iii) failed to support stock prices, except possibly for U.S. financialstocks.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-106/2/DSF 1.

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Date of creation: 19 Oct 2010
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Handle: RePEc:dgr:uvatin:20100106

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

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  1. Saffi, Pedro & Sigurdson, Kari, 2008. "Price efficiency and short selling," IESE Research Papers, IESE Business School D/748, IESE Business School.
  2. Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
  3. Seraina GRUENEWALD & Alexander F. WAGNER & Rolf H. WEBER, . "Short Selling Regulation after the Financial Crisis – First Principles Revisited," Swiss Finance Institute Research Paper Series, Swiss Finance Institute 09-28, Swiss Finance Institute.
  4. 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.
  5. 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.
  6. 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.
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Blog mentions

As found by, 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. Sascha Füllbrunn & Tibor Neugebauer, 2012. "Margin Trading Bans in Experimental Asset Markets," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2012-058, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. 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.
  3. 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.
  4. Amelia Pais & Philip A. Stork, 2013. "Short-Selling, Leverage and Systemic Risk," Tinbergen Institute Discussion Papers, Tinbergen Institute 13-186/IV/DSF68, Tinbergen Institute.
  5. 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.
  6. Chunmei Lin & Massimo Massa & and Hong Zhang, 2014. "Mutual Funds and Information Diffusion: The Role of Country-Level Governance," Tinbergen Institute Discussion Papers, Tinbergen Institute 14-079/IV/DSF76, Tinbergen Institute.
  7. Lensberg, Terje & Schenk-Hoppé, Klaus Reiner & Ladley, Dan, 2012. "Costs and Benefits of Speculation," Discussion Papers, Department of Business and Management Science, Norwegian School of Economics 2012/12, Department of Business and Management Science, Norwegian School of Economics.
  8. 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.
  9. 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).
  10. 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 São Paulo (FEA-USP) 2012_18, University of São Paulo (FEA-USP).
  11. Robert Battalio & Hamid Mehran & Paul Schultz, 2011. "Market declines: Is banning short selling the solution?," Staff Reports, Federal Reserve Bank of New York 518, Federal Reserve Bank of New York.
  12. Markus K. Brunnermeier & Martin Oehmke, 2013. "Predatory Short Selling," NBER Working Papers 19514, National Bureau of Economic Research, Inc.
  13. 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.
  14. 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).
  15. Óscar Arce & Sergio Mayordomo, 2012. "Short Sales Constraints and Financial Stability: Evidence from the Spanish 2011 Ban," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 25/12, School of Economics and Business Administration, University of Navarra.
  16. Robert A. Jarrow & Martin Larsson, 2014. "Informational Efficiency under Short Sale Constraints," Papers 1401.1851,


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