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Were the European short selling bans of 2011 effective?

Author

Listed:
  • Jani Saastamoinen

    (University of Eastern Finland)

  • Niko Suhonen

    (University of Eastern Finland)

Abstract

Regulators in Belgium, France, Italy and Spain issued a short sales ban on financial stocks to contain volatility in August 2011. This paper uses a quasi-experimental approach to assess the ban's effectiveness. Control groups in the study are the ADRs of the banned financial stocks and their European peers. Using differences-in-differences and differences-in-differences-in-differences methodologies to measure differences in volatility, our results suggest that the ban was ineffective in containing volatility.

Suggested Citation

  • Jani Saastamoinen & Niko Suhonen, 2013. "Were the European short selling bans of 2011 effective?," Economics Bulletin, AccessEcon, vol. 33(3), pages 1847-1851.
    • Handle: RePEc:ebl:ecbull:eb-13-00180
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I3-P173.pdf
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    References listed on IDEAS

    as
    1. Eric C. Chang & Joseph W. Cheng & Yinghui Yu, 2007. "Short‐Sales Constraints and Price Discovery: Evidence from the Hong Kong Market," Journal of Finance, American Finance Association, vol. 62(5), pages 2097-2121, October.
    2. 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.
    3. Ólan T. Henry & Michael McKenzie, 2006. "The Impact of Short Selling on the Price-Volume Relationship: Evidence from Hong Kong," The Journal of Business, University of Chicago Press, vol. 79(2), pages 671-692, March.
    4. Ian Appel & Caroline Fohlin, 2010. ""Shooting the Messenger?" The Impact of Short Sale Bans in Times of Crisis," Economics Working Paper Archive 574, The Johns Hopkins University,Department of Economics.
    5. Blau, Benjamin M. & Van Ness, Robert A. & Warr, Richard S., 2012. "Short selling of ADRs and foreign market short-sale constraints," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 886-897.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Short selling restrictions; financial markets regulation; volatility; quasi-experiment; differences-in-differences estimation;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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