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Bear Raids and Short Sale Bans: Is Government Intervention Justifiable?

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  • Richmond Mathews

    (Duke University)

  • Naveen Khanna

    (Michigan State University)

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    Abstract

    incur significant trading losses in the process. We find that for a large enough existing stake, the value of ensuring the right decision offsets these trading losses. However, when his existing stake is inadequate, short sellers succeed in destroying value. Whether this justifies intervention depends on the expected value loss from inefficient decisions versus the costs of intervention.

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    File URL: http://www.economicdynamics.org/meetpapers/2010/paper_165.pdf
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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 165.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:165

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    1. Duffie, Darrell & Garleanu, Nicolae & Pedersen, Lasse Heje, 2002. "Securities lending, shorting, and pricing," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 307-339.
    2. Leland, Hayne E, 1992. "Insider Trading: Should It Be Prohibited?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 859-87, August.
    3. Allen, Franklin & Gale, Douglas, 1992. "Stock-Price Manipulation," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 503-29.
    4. Albert S. Kyle & Jean-Luc Vila, 1991. "Noise Trading and Takeovers," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 54-71, Spring.
    5. Itay Goldstein & Alexander Guembel, 2008. "Manipulation and the Allocational Role of Prices," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 133-164.
    6. Mark Bagnoli & Barton L. Lipman, 1996. "Stock Price Manipulation Through Takeover Bids," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 124-147, Spring.
    7. Yuanzhi Luo, 2005. "Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions," Journal of Finance, American Finance Association, vol. 60(4), pages 1951-1982, 08.
    8. Geczy, Christopher C. & Musto, David K. & Reed, Adam V., 2002. "Stocks are special too: an analysis of the equity lending market," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 241-269.
    9. repec:bla:restud:v:75:y:2008:i:1:p:133-164 is not listed on IDEAS
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