In September 2008, during one of the most intense periods of the financial crisis, the Financial Services Authority (FSA) decided to ban short-selling in financial stocks during four months in the U.K. market. The aim of the ban was to guard against instability and calm the market. This paper...

Exploiting cross-sectional and time-series variations in European regulations during the July 2008 – June 2009 period, we show that: 1) Prohibition on covered short selling raises bid-ask spread and reduces trading volume, 2) Prohibition on naked short selling raises both volatility and...

This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced—or has failed to influence—federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH has...

With unique daily short sale data of Borsa Istanbul (stock exchange of Turkey), we investigate the dynamic relationship between short selling activity, volatil- ity, liquidity and market returns from January 2005 to December 2012 using a VAR(p)-cDCC-FIEGARCH(1,d,1) approach. Our findings suggest...

Exploiting cross-sectional and time-series variations in European regulations during the July 2008–June 2009 period, we show that: (1) prohibition on covered short selling raises bid-ask spread and reduces trading volume, (2) prohibition on naked short selling raises both volatility and...

Managers tend to issue equity when a firm is overvalued. Short selling is generally frequent among overvalued firms. By conditioning short selling on firm overvaluation, we show that short selling reduces managerial equity market timing and increases leverage. This moderating impact of short...

This paper studies whether equity short sales and options are complements or substitutes and finds that they are substitutes when the underlying market faces short-selling constraints. This substitutability is associated with the following implications for stock price volatility and stock market...

Using proprietary data on equity lending supply, loan fees and quantities, we examine the link between institutional ownership structure and the market for equity lending and stock prices. We find that both total institutional ownership and ownership concentration (measured by the Herfindahl...

Most stock exchange regulators around the world reacted to the 2007-2009 crisis by imposing bans or regulatory constraints on short-selling. Short-selling restrictions were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured...