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

  • Beber, Alessandro
  • Pagano, Marco

Most stock exchange regulators around the world reacted to the 2007-2009 crisis by imposing bans or regulatory constraints on short-selling. Short-selling restrictions were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured different degrees of stringency. We exploit this considerable variation in 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 bear market phases, and (iii) failed to support stock prices, except possibly for U.S. financial stocks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7557.

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Date of creation: Nov 2009
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Handle: RePEc:cpr:ceprdp:7557
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  1. Halling, Michael & Pagano, Marco & Randl, Otto & Zechner, Josef, 2005. "Where is the Market? Evidence from Cross-Listings," CEPR Discussion Papers 4987, C.E.P.R. Discussion Papers.
  2. Saffi, Pedro & Sigurdson, Kari, 2008. "Price efficiency and short selling," IESE Research Papers D/748, IESE Business School.
  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 09-28, Swiss Finance Institute.
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