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The Relevance of Short Sales to the Maltese Stock Market

Listed author(s):
  • Paul V. Azzopardi

    (Azzopardi Investment Management Ltd.)

  • Silvio John Camilleri

    (Banking & Finance Dept., FEMA, University of Malta)

The paper discusses the possible effects of short sales on the operation of a very small stock market such as the Maltese one. After studying the basic mechanics of short selling procedures, the paper reviews the salient literature with particular reference to how short sales may enhance informational efficiency and their relationship with liquidity. The paper proceeds by examining these relationships in the context of the Maltese securities market. The study reveals that short sales may be desirable on the Maltese stock market for enhancing price efficiency and liquidity, yet a more formal framework for conducting such transactions is required. In addition, short positions may be particularly risky in the context of the Maltese stock market, due to low liquidity levels.

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Paper provided by EconWPA in its series Finance with number 0409009.

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Length: 17 pages
Date of creation: 07 Sep 2004
Handle: RePEc:wpa:wuwpfi:0409009
Note: Type of Document - pdf; pages: 17
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  1. Bhattacharya, Anand K & Gallinger, George W, 1991. "Causality Tests of Short Sales on the New York Stock Exchange," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 14(3), pages 277-286, Fall.
  2. Said Elfakhani, 2000. "Short positions, size effect, and the liquidity hypothesis: implications for stock performance," Applied Financial Economics, Taylor & Francis Journals, vol. 10(1), pages 105-116.
  3. Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June.
  4. Figlewski, Stephen & Webb, Gwendolyn P, 1993. " Options, Short Sales, and Market Completeness," Journal of Finance, American Finance Association, vol. 48(2), pages 761-777, June.
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