Article
The Causal Effects of Short-Selling Bans: Evidence from Eligibility Thresholds
The Review of Asset Pricing Studies
(2018)
Abstract
We identify the causal effects of short-selling bans on stock prices using regression discontinuity (RD). We exploit three threshold-based rules that determine a stock’s short-selling eligibility on the Hong Kong Stock Exchange. Short-selling bans have a large effect on short-selling volume at all thresholds. Despite this, bans do not affect stock prices. Stock returns, volatility, and crash risk are not different for banned versus unrestricted stocks when appropriate counterfactual stocks are used to measure a ban’s effects. Our findings suggest that short-selling bans are not as costly as previously argued, but are ineffective at reducing volatility or buttressing prices.
Keywords
- Short Selling,
- Regression Discontinuity,
- Financial Market Regulation
Publication Date
June 11, 2018
DOI
10.2139/ssrn.2598142
Citation Information
Alan D. Crane, Kevin Crotty, Sebastien Michenaud and Patricia L. Naranjo. "The Causal Effects of Short-Selling Bans: Evidence from Eligibility Thresholds" The Review of Asset Pricing Studies Vol. 9 Iss. 1 (2018) p. 137 - 170 Available at: http://works.bepress.com/sbastien-michenaud/2/