How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending rates. This finding can be explained with a model that...

After seventy years with no changes to short sale regulation, the United States Securities and Exchange Commission intervened three times with regulatory action from July 2007 through October 2008. The Commission first loosened restrictions on short sales by repealing the “Uptick Rule” in...

In finance literature it is known that on a financial market in which short-selling of risky assets is restricted, the market portfolio is typically not efficient (see e.g. Fama and French (2004)). This paper analyses two different kinds of regulatory policies of short-sales on financial markets...