Short-Selling Bans around the World: Evidence from the 2007-09 Crisis

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  • 1 January 2010
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      • Published in RePEc
Abstract
Most stock exchange regulators around the world reacted to the 2007-2009 crisis byimposing bans or regulatory constraints on short-selling. Short-selling restrictions wereimposed and lifted at different dates in different countries, often applied to different sets ofstocks and featured different degrees of stringency. We exploit this considerable variationin short-sales regimes to identify their effects with panel data techniques, and find that bans(i) were detrimental for liquidity, especially for stocks with small market capitalization,high volatility and no listed options; (ii) slowed down price discovery, especially in bearmarket phases, and (iii) failed to support stock prices, except possibly for U.S. financialstocks.

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