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

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Abstract

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.

Suggested Citation

  • Alessandro Beber & Marco Pagano, 2009. "Short-Selling Bans around the World: Evidence from the 2007-09 Crisis," CSEF Working Papers 241, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 03 Sep 2011.
    • Handle: RePEc:sef:csefwp:241
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    References listed on IDEAS

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    More about this item

    Keywords

    short selling; ban; crisis; liquidity; price discovery.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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