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Costs and Benefits of Financial Regulation: Short-Selling Bans and Transaction Taxes

Listed author(s):
  • Terje Lensberg

    (Norwegian School of Economics (NHH))

  • Klaus Reiner Schenk-Hoppé

    (University of Manchester and Norwegian School of Economics (NHH))

  • Daniel Ladley

    (University of Leicester)

We quantify the effects of financial regulation in an equilibrium model with delegated portfolio management. Fund managers trade stocks and bonds in an order-driven market, subject to transaction taxes and constraints on short-selling and leverage. Results are obtained on the equilibrium properties of portfolio choice, trading activity, market quality and price dynamics under the different regulations. We find that these measures are neither as beneficial as some politicians believe nor as damaging as many practitioners fear.

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File URL: http://ssrn.com/abstract=2128599
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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 12-27.

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Length: 57 pages
Date of creation:
Handle: RePEc:chf:rpseri:rp1227
Contact details of provider: Web page: http://www.SwissFinanceInstitute.ch

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