Premium
Short‐Selling Bans Around the World: Evidence from the 2007–09 Crisis
Author(s) -
BEBER ALESSANDRO,
PAGANO MARCO
Publication year - 2013
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2012.01802.x
Subject(s) - market liquidity , capitalization , price discovery , exploit , financial crisis , stock (firearms) , monetary economics , business , economics , financial economics , financial system , geography , macroeconomics , futures contract , linguistics , philosophy , computer security , archaeology , computer science
Most regulators around the world reacted to the 2007–09 crisis by imposing bans on short selling. These were imposed and lifted at different dates in different countries, often targeted different sets of stocks, and featured varying degrees of stringency. We exploit this variation in short‐sales regimes to identify their effects on liquidity, price discovery, and stock prices. Using panel and matching techniques, we find that bans (i) were detrimental for liquidity, especially for stocks with small capitalization and no listed options; (ii) slowed price discovery, especially in bear markets, and (iii) failed to support prices, except possibly for U.S. financial stocks.