It's Sho Time! Short-Sale Price-Tests and Market Quality
- 14 August 2007
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
We examine the effects of the SEC mandated temporary suspension of short-sale price-tests for a set of Pilot securities. While short-selling activity increased both for NYSE and NASDAQ-listed Pilot stocks, returns and volatility at the daily level are unaffected. NYSE-listed Pilot stocks experience more symmetric trading patterns and a slight increase in spreads and intraday volatility after the suspension while there is a smaller effect on market quality for NASDAQlisted Pilot stocks. The results suggest that the effect of the price-tests on market quality can largely be attributed to the distortions in order flow created by the price-tests in the first place. Therefore, we believe that the price-tests can safely be permanently suspended.Keywords
This publication has 19 references indexed in Scilit:
- Supply and Demand Shifts in the Shorting MarketThe Journal of Finance, 2007
- Which Shorts are Informed?SSRN Electronic Journal, 2007
- Short interest, institutional ownership, and stock returnsJournal of Financial Economics, 2005
- Securities lending, shorting, and pricingPublished by Elsevier ,2002
- The market for borrowing stockPublished by Elsevier ,2002
- An Investigation of the Informational Role of Short Interest in the Nasdaq MarketThe Journal of Finance, 2002
- Short-sellers, fundamental analysis, and stock returnsJournal of Financial Economics, 2001
- Short Selling on the New York Stock Exchange and the Effects of the Uptick RuleJournal of Financial Intermediation, 1999
- Options, Short Sales, and Market CompletenessThe Journal of Finance, 1993
- Constraints on short-selling and asset price adjustment to private informationJournal of Financial Economics, 1987