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Efficiency and the Bear: Short Sales and Markets Around the World

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  • ARTURO BRIS
  • WILLIAM N. GOETZMANN
  • NING ZHU

Abstract

We analyze cross-sectional and time-series information from 46 equity markets around the world to consider whether short sales restrictions affect the efficiency of the market and the distributional characteristics of returns to individual stocks and market indices. We find some evidence that prices incorporate negative information faster in countries where short sales are allowed and practiced. A common conjecture by regulators is that short sales restrictions can reduce the relative severity of a market panic. We find strong evidence that in markets where short selling is either prohibited or not practiced, market returns display significantly less negative skewness. Copyright 2007 by The American Finance Association.

Suggested Citation

  • Arturo Bris & William N. Goetzmann & Ning Zhu, 2007. "Efficiency and the Bear: Short Sales and Markets Around the World," Journal of Finance, American Finance Association, vol. 62(3), pages 1029-1079, June.
  • Handle: RePEc:bla:jfinan:v:62:y:2007:i:3:p:1029-1079
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    • G0 - Financial Economics - - General

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