Publication Type

Journal Article

Publication Date

6-2013

Abstract

In September 2008, the U.S. Securities and Exchange Commission (SEC) temporarily banned most short sales in nearly 1,000 financial stocks. We examine the ban's effect on market quality, shorting activity, the aggressiveness of short sellers, and stock prices. The ban's effects are concentrated in larger stocks; there is little effect on firms in the lower half of the size distribution. Although shorting activity drops by about 77% in large-cap stocks, stock prices appear unaffected by the ban. All but the smallest quartile of firms subject to the ban suffer a severe degradation in market quality.

Keywords

short sales, price efficiency, option markets, liquidity, uncertainty, quality, world, time, bear

Discipline

Business | Portfolio and Security Analysis

Research Areas

Finance

Publication

Review of Financial Studies

Volume

26

Issue

6

First Page

1363

Last Page

1400

ISSN

0893-9454

Identifier

10.1093/rfs/hht017

Publisher

Oxford University Press

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1093/rfs/hht017

Comments

Selected “Best Paper” at the 2009 University of Michigan / Mitsui conference on “Financial (In) Stability.”

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