Premium
Short Sale Constraints and Dispersion of Opinion: Evidence from the Indian Equity Market
Author(s) -
Giannikos Christos I.,
Gousgounis Eleni
Publication year - 2012
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2011.00323.x
Subject(s) - equity (law) , dispersion (optics) , financial economics , empirical evidence , monetary economics , business , market efficiency , opinion leadership , economics , law , political science , philosophy , physics , optics , epistemology
Short sale constraints can inflate market prices, as bearish investors cannot act on their market views. The paper uses data from the Indian equity market to test whether opinion dispersion leads to higher overpricing when short sales are prohibited. The Indian equity market provides a natural testing environment, as short sales were banned between 2001 and 2008. The empirical results offer supportive evidence of the relation between opinion dispersion and overpricing in a market with short sale constraints.