This paper examines whether the 2011 European short sale ban on financial stocks proved to be successful or had a negative impact on financial markets. We explicitly take an options market perspective and focus on market participants' changes in beliefs and expectations. During the ban, short...

In light of the recent state of global financial markets, the practice of short selling has come under increasing scrutiny. While financial institutions argue that short selling is a necessary mechanism for price discovery and contributes significantly to market liquidity, regulators view it as...

Did the August 2011 European short sale bans on financial stocks accomplish their goals? In order to answer this question, we use stock options' implied volatility skews to proxy for investors' risk aversion. We find that on ban announcement day, risk aversion levels rose for all stocks but more...